Author Topic: Case Study: 2nd year teacher starting the married life soon  (Read 4953 times)

rageth

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Case Study: 2nd year teacher starting the married life soon
« on: April 11, 2015, 08:09:11 PM »
Greetings!  This is my first week (it was my spring break) reading the blog and perusing the forum, and I've been devouring everything.  I've been on Mint for awhile tracking my expenses, and I'm just looking for more ways to grow my money mustache and hopefully slowly get my soon-to-be bride on the same page as me, so we can get going on our journey to FIRE.

My current monthly income: $2500
$2400 (teacher salary)
$100 (tutoring with adjustment for travel)

+Periodic Income:
Summer School Teaching: $1300
Summer Side Hustle: ~$700

Monthly spending:
Rent: $575
Groceries: $0 (Fiancee pays for)
Utilities, Internet: $0 (Fiancee pays for)
Phone: $0 (on family plan with dumb phone)
SLs: $451
Roth contributions: $250
Emergency savings account contribution: $350
Gas: $200 (We have my family 30 mins away and hers 2 hours away, but I am going to try to lessen this by biking to work now)
Dining Out: $200 (again, going to try to make this number smaller)
Gym: $99
Misc.: $150
Car Insurance (05 Hyundai Santa Fe owned free and clear): $150 twice yearly

Total Monthly Expenses: $2,225
Remaining Income: $275

Assets:
Roth: $2,200
Savings account: $1,650
403(b): $2700

My SLs:
$5100 @5.35%, $61 required monthly payment (I pay $100)
~$23,000 loan through parents' home equity @3.3% with monthly payments of $351

Frequently, my remaining income has gone towards paying for things for the wedding that is not being covered by my family or my fiancee's.  After August, however, I'll have that extra $275/month to do with as I wish and I also have that $2000 extra I make in the summers.  I worked part-time for the school district before, and they had been making contributions to the 403(b), but once I became a teacher they no longer made contributions as they began paying into the Wisconsin Employee Trust Fund for a pension.  I can make my own contributions to the 403(b), but there is no employee match nor is there a state employee 401(k) option.  SS is also being taken out from my paychecks as well.

I guess I basically wanted to know what your ideas were on what my next steps should be.  I've read many suggest a traditional IRA rather than a Roth, and I plan on rolling over my Roth that is through an advisers group currently to Vanguard as soon as I break the $3000 minimum required to invest with Vanguard.  Any recommendations for Vanguard funds to invest in?  I'm also wondering what opinions you have on what I should do with the 403(b)?

I just applied and was approved for cash back credit card as well, and I plan on starting to use the Red Card strategy for paying for everything now with the cash back card and Red Card.

Thank you for any advice or opinions!

Retired To Win

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #1 on: April 11, 2015, 08:30:06 PM »
How much of an Emergency Reserve Fund have you built up?  I always recommend a minimum of six months' worth of basic expenses in a liquid (savings) account to cushion you if your income gets interrupted or preempted for any reason. (I personally hold one year's worth.)  In your case, six months of expenses would amount to about $8000.  (I did say basic living expenses.)

So, getting that built up is where I would start in your shoes.  And, because emergencies do not give you fair warning or phase in slowly, building that emergency reserve needs to be supercharged, not trickled in.

Good luck.

rageth

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #2 on: April 11, 2015, 08:52:03 PM »
Thank you, I really appreciate the input!  I've been doing a lot of reading and talking with my parents (I'm only 26) and I've seen and heard lots of different things in regards to quickly building up the emergency fund (savings sitting at $1650) vs. investing in the Roth and paying my loans off quicker.  I've been told that the Roth can be used as an emergency fund should the need arise, though it is indeed far less liquid than a savings account.  I've also read that I should be thinking about my loans as a hair on fire emergency.  Having an emergency fund first does make sense.

With that in mind, I should be able to have that built up (knock on wood) in 8 months with some hard work or sooner if I'm really trying.  Any thoughts on the 403(b) and Roth after I've built up a comfortable emergency fund?

MrsPete

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #3 on: April 11, 2015, 10:14:32 PM »
From a fellow teacher, reconsider teaching summer school.  You need a break from teaching.  Those breaks recharge your soul, and you come back in the fall ready and excited for a new class.  Without that break, it will "catch up to you" (I only had to do it one year to figure that out!).  I suggest you consider a different summer job (especially if, like my area, summer school is ONLY a paycheck, no benefits).

Those student loans are pretty brutal on your entry-level teaching salary.  Any chance you're at a Title One school?  If so, you might be able to apply for forgiveness.  Any chance you could move to a Title One school? 

Could you work out at home (or run) instead of paying for a gym?  Even if you buy some equipment, you'd "be ahead" in only a few months.  If you're into lifting weights, are you allowed to lift at your local high school?  I'm guessing your elementary school doesn't have equipment that you'd find challenging! 

You mentioned tutoring -- are you qualified to coach?  I know, your elementary school probably won't have such jobs, but your local high school probably does.  It doesn't pay all that well, but parts of the job are fun. 

You didn't list a pension as an asset -- is that something you'll eventually have as a teacher?  I suspect you aren't "vested" yet because you're still new to teaching. 

You don't sound like you're in bad shape.  I'd say tweak the things you can, and stay the course for now.  You say you're spending on the wedding -- it's a once in a lifetime thing, so that's not bad.  But be sure you and your future wife discuss budget, set goals for yourselves as a couple, and talk about how you want to reach those goals.  Starting out well will make a HUGE difference in your life -- you won't see that difference now, but you will see it in the future.



ChaseJuggler

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #4 on: April 11, 2015, 10:24:44 PM »
Teacher here. Pretax 457 is the way to go for long term savings if you have one. But first you need at least 6k or so in your checking account. Once you have enough to pay cash for a decent used high mpg car, then you can drop collision coverage and chop your insurance in half. 

Any debt with an interest rate above 7 percent is an emergency. Yours isn't too bad.

The gas bill looks super high to me. Save up, and swap the car for a salvage title Prius on craigslist if you can find one. Just have a dealership look it over before you buy it.

(These are all things that have worked well for me. Good luck!)

MDM

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #5 on: April 11, 2015, 11:15:14 PM »
...(Fiancee pays for)

I guess I basically wanted to know what your ideas were on what my next steps should be.

Next steps should include sitting down with fiancee and jointly planning what the two of you will do.  Tax boundaries for MFJ are different from filing singly, and thus may affect your decisions.

How do things look when you combine incomes, assets and liabilities for the two of you?

rageth

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #6 on: April 12, 2015, 09:15:15 AM »
...(Fiancee pays for)

I guess I basically wanted to know what your ideas were on what my next steps should be.

Next steps should include sitting down with fiancee and jointly planning what the two of you will do.  Tax boundaries for MFJ are different from filing singly, and thus may affect your decisions.

How do things look when you combine incomes, assets and liabilities for the two of you?

I've been wanting to sit down with my brother for just that reason because he's halfway through to getting his CPA and would be able to help me a little bit more in terms of filing.  Looking at the tax brackets, it looks like we'll be right in the middle of the $1845 + 15% over $18,000 range.

My fiancee is currently bringing in $1200/month and between her payments on her $34,500 in SLs, high-deductible insurance premiums, gas (she works 40 minutes away), and paying our utilities, groceries, and other wedding miscellany, she's only putting away $200/monthly in an emergency fund that's at $4000.  No investments, no 401k, and a 99 Saturn that's on its last legs.  I'm trying to get her to start using Mint just to help her see where her money is going because I think she would be surprised just how much per month her spending on going out to eat at lunch, etc. is costing her.  It will also help her monthly insurance expenditures once we're married since she will move over to my health insurance.

I'm thinking that filing jointly is going to help us lower our student loan payments as well as how much we get back at tax time.  We're trying to find a different job that's actually in her field of ecology/wildlife rehabilitation, but those jobs are hard to find and the difficult part is that the job has an ideal time to be found such that I can also look for teaching jobs in whatever area that is.  Our wedding in August also makes moving out of state for an ideal job rather difficult, especially since my district, one of the better paying districts in our area, also includes a $3500 fine for breaking our teaching contracts early.

Teacher here. Pretax 457 is the way to go for long term savings if you have one.

What are the advantages of the 457 over a 403b?  vs. a Roth?  The state of Wisconsin does offer a 457, but would it be advisable to invest in a 457 or 403b if I will likely be moving out-of-state in the next 3 years?

From a fellow teacher, reconsider teaching summer school.  You need a break from teaching.  Those breaks recharge your soul, and you come back in the fall ready and excited for a new class.  Without that break, it will "catch up to you" (I only had to do it one year to figure that out!).  I suggest you consider a different summer job (especially if, like my area, summer school is ONLY a paycheck, no benefits).

Those student loans are pretty brutal on your entry-level teaching salary.  Any chance you're at a Title One school?  If so, you might be able to apply for forgiveness.  Any chance you could move to a Title One school? 

Could you work out at home (or run) instead of paying for a gym?  Even if you buy some equipment, you'd "be ahead" in only a few months.  If you're into lifting weights, are you allowed to lift at your local high school?  I'm guessing your elementary school doesn't have equipment that you'd find challenging! 

You mentioned tutoring -- are you qualified to coach?  I know, your elementary school probably won't have such jobs, but your local high school probably does.  It doesn't pay all that well, but parts of the job are fun. 

You didn't list a pension as an asset -- is that something you'll eventually have as a teacher?  I suspect you aren't "vested" yet because you're still new to teaching.

I did one summer of teaching math intervention, and I said no thank you.  Last summer, though, I got to teach a fun class that I called Learning Spanish through Games, and that was easy.  I understand that I need to recharge, especially after my group of first graders I had this year, but the money is really good and only half day for a month.  I still get a month to do with as I choose (just in time for the wedding conveniently), and I have the afternoons to do my side job of doing yard work.

Unfortunately I'm not at a Title 1 school currently.  To get any benefit for working at a Title school, at least when I looked last, I needed to work at a Title school for 5 years.  With the likelihood of my moving out of state to follow my future wife when she finds a job in her field, I think it would be better for future employment to show that I was not moving frequently between schools and start taking on some leadership roles at my currrent school now that I've been there for 2 years.

In regards to the gym, it's a gym where I'm learning Brazilian Jiu Jitsu, something that really helps me keep my sanity when my students and administrators are testing me, and it's also something I'd like to continue to develop as something I could fall back on to teach in the future as it is a HUGELY expanding sport.

As for coaching, in Wisconsin, elementary schools get out AFTER high school, so most high school and middle school practices are half over when I would be dismissing my students.  Thus my only option is tutoring, and I'd like to make all my tutoring appointments somewhere local that I can bike to to save on gas money next year.

As far as pension, yes we have a pension program that I pay $116 per paycheck as well as $103 into SS that I never see as they are both deducted pre-tax.

MDM

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #7 on: April 12, 2015, 09:38:50 AM »
What are the advantages of the 457 over a 403b?  vs. a Roth?  The state of Wisconsin does offer a 457, but would it be advisable to invest in a 457 or 403b if I will likely be moving out-of-state in the next 3 years?
Main advantage is that 457 money can be accessed penalty-free before age 59.5.  Check for specifics on your plan, including whether leaving your job would require you to start taking the 457 money.  Assuming equivalent investment options, that's the only potential downside I can think of.

Roth vs. traditional is a choice that applies (or might apply, again depending on your specific plans) to either a 457 or 403.


rageth

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #8 on: November 13, 2015, 09:14:36 PM »
I just wanted to post an update since my first post.

In 7 months, with a wedding that I had plenty of expenses for, without any change to my income, I've made some big gains due to some small changes.

Emergency fund: $8000
Roth: $2600
403: $5000

I looked into the 457, but since my state does not allow 457 contributions for employees who contribute to the state pension system, I had to go with the 403. I transferred the 403 over to Fidelity and my Roth over to Vanguard. I'm putting away just over $400/month into the 403 and $20/month into the Roth just to keep pushing it up. I started using YNAB, and that has helped me immensely. The school I work at also just qualified as a low-income school, so my SLs are all being deferred and within 5 years will be forgiven. In the spring I won't be able to save as much as I will be completing myMasters program to increase my income (~20% gross).

I had been focusing all of my savings efforts into my emergency fund as had been suggested. Now I'm going to split my savings power 3 ways: 50% towards saving up for a house, 25% vacation fund, 25% building up my emergency fund to $10k

I'd really like to thank all of you Mustachians out there for all of the suggestions and free sharing of knowledge. You've definitely helped me get my finances on the right track!

MDM

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #9 on: November 13, 2015, 09:18:01 PM »
Congratulations!  Thanks for the update - always good to see success stories.

jamaicaspanish

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #10 on: November 14, 2015, 04:21:21 AM »
Look into your state's 529 plan.
I'm pretty sure you can tax-shelter tuition payments for yourself.

Teacherstache

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #11 on: November 14, 2015, 11:18:14 AM »
Great job! Looks like you've been working hard. Has your wife had any luck or leads finding a job in her field?

rageth

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #12 on: November 14, 2015, 12:05:30 PM »
Great job! Looks like you've been working hard. Has your wife had any luck or leads finding a job in her field?

Unfortunately, no.  She's in wildlife ecology, and funding to state and non-profits that are in that field is pretty minimal.  Most people that get jobs in the field seem to stay there for life leaving very little for people graduating with a degree that field.  Most places only offer non-paid internships because they can't afford to pay for the labor but need it.  It's a tough field to break into, but we're still applying constantly, and we upgraded to a used Prius for her to at least lower her fuel expenses monthly and help us save money visiting her family that live 2 hours away.


Look into your state's 529 plan.
I'm pretty sure you can tax-shelter tuition payments for yourself.

Thanks for the advice, I'll look into that!  The tuition shouldn't be that much as I only need 2 credits to finish the Masters, but as I've learned over the last few months, every little bit counts.

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Re: Case Study: 2nd year teacher starting the married life soon
« Reply #13 on: November 14, 2015, 01:48:34 PM »
As far as wife goes, is she doing everything she can to get into a position to snag a job as it comes available? Ie- write and publish articles (in papers/online and ideally in journals), volunteering somewhere where she can add valuable field skills to her resume, working with her uni on field surveys/offering to draft check research, heading local/govt ecological groups to make contacts with those in the industry (so if there's an opening they let her know?). It's such a tough field to break into, but keeping herself involved and current is her best bet, as the value of a degree like that tends to degrade quickly if you aren't involved in the field. Not having kids, now is absolutely the best time for her to do this.