Budget Healthcheck

[FarmerPete]

I'm a 33 year old guy who works in IT in the public sector.  In general, I've always lived beneath my income.  I like to think I'm pretty frugal, although I'm put to shame by many here.  I've been married 4.6 years now to my DW who is 34.  We have one child who is almost 2.  We'd like to have more, so far it hasn't been happening.  My wife is staying at home.  She does some watching of other kids a couple days a week, but it's pretty minimal.  I guess I'd like to have some opinion on my budget/finances.  I've always been an investor, and for the most part I put all of my "savings" into my vanilla brokerage.  My IRAs are all invested in Spartan mutual funds.  My brokerage is invested in a mix of ETFs and some individual stocks.  I really want to save more.

I commute about 15 miles to work (20 minutes or so).  Where I work is kind of out in the middle of nowhere, so no public transportation could take me there.  It is probably bikeable, but I'd need to get some more endurance up on my bike (10 miles is my current top distance.  Going 30 miles in 1 day is a bit more than that).  I also live in Michigan, and due to the location and the state of the roads, there are plenty of days I couldn't bike safely.  I do work from home 1 day a week, so that cuts down on my commute a bit.

I've lived in my current house for 7.5 years now.  I bought it for $185k and zillow says it's worth ~$147k now.  Luckily, I've paid off a lot of it and only owe $80k.  I've refinanced 3 times in 7.5 years....yeah, every time it really was a good deal.  6.25% 30yr to 5.125% 30yr to 4.625% 30yr to 3.25% 15yr.  I have a little under 13 years left on my 3.25% mortgage.  That's the only debt I currently have (other than CC float, which I pay in full every month).

I know I'm going to get some questions about why I have so much cash.  All of that money is marked for expenses.  I use YNAB and I have categories that I sink money into every month.  For example, my house repair category is currently sitting at ~$3000.  My new car fund is ~$6000.  Auto repair at ~$1800.  I've got a $820 car insurance bill that will be fully funded in a month when the bill is due.  I put some of that cash into CDs that are at least beating inflation.  For my fluxuating utilities, I took the average expense over the last two years and budget a slight bit more than that.  Basically I'm replicating the utilities budget saver program, but I earn interest on the money instead of the utility.  I'm sure many would consider this underutilized money, but it's all got a job that doesn't involve retirement/savings.  I could put the money in the market, but since it's all short to medium term savings, I don't want to tie it up in the market.

The other weird thing on here is my Charitable trust.  I set that up through Fidelity.  Basically, I can transfer appreciated stocks to my charity and take a tax writeoff of the entire stock value.  I then don't have to pay taxes on the appreciation.  I then have the trust give money to charity as I dictate.  Basically, it saves me a ton on taxes vs donating cash to charity.  I typically sell off my most appreciated stocks if I need to raise money for our giving.

Our income is a little more irregular than it appears below.  I participate in our on-call rotation.  This nets me ~6k a year.  It's every 6 weeks, so my paychecks are irregular.  For taxes, I took the average of my high checks, medium checks, and small checks and annualized it.

Code: [Select]

INCOME                         Monthly     Annual
Mine                               5651      67813
DW                                  280       3360
Total                              5931      71173


Payroll Deductions             Monthly     Annual
Taxes                              1030      12359
401k                                283       3391
401k Match                          509       6103
FSA                                  67        800
Health Insurance                    198       2374
Dental                                4         51
Life Insurance                       26        312
Total                              2116      25390

Fixed Expenses                 Monthly     Annual
Mortgage                            632       7589
Escrow (Tax/Insurance)              313       3755
Electric, Water, Sewer              150       1800
Natural Gas                          60        720
Car Registration                     20        240
Car Insurance                       140       1680
Firewood                             10        120
Propane                               3         36
Garbage                              18        216
Total                              1346      16156

Everyday Expenses              Monthly     Annual
Groceries                           250       3000
Gas                                 200       2400
Diapers/Wipes/etc                    40        480
Houshold Goods                       99       1192
Medical (Copays/prescription        100       1200
Restaurants/Entertainment            50        600
Total                               739       8872

DW Expenses                    Monthly     Annual
Clothing                             20        240
Haircut                               5         56
Spending                             50        600
Total                                75        896

My Expenses                    Monthly     Annual
Clothing                             20        240
Haircuts                              8         96
Spending                             44        528
SiriusXM (From spending)              6         72
Total                                78        936

Giving                         Monthly     Annual
Tithing/Charity                     360       4320
Gifts                                70        840
Total                               430       5160

Sink Funds                     Monthly     Annual
Car Repairs                         100       1200
Home Maintenance                    250       3000
Vacations                           100       1200
Total                               450       5400

Luxary Expenses                Monthly     Annual
Amazon Prime                          8        100
Netflix                               8         96
Cell                                 29        348
Internet                             41        496
CrashPlan                             4         48
Sams Club                             4         48
Total                                95       1136

Savings                        Monthly     Annual
Car Replacement                     250       3000
Long Term Savings                   350       4200
Total                               600       7200

Total Income                       5931      71173
Total Expenses                     5929      71146
Difference                            2         27

Assets
Retirement                        60000
Brokerage                         69000
Charitable Trust                   6000
CDs (4 at 2.5%)                    8400
Checking                          11400
House                            147675
2010 Ford Fusion                  10000
2004 Honda Element                 7700
Total                            320175

Liabilities
Mortgage 3.25%                    79120  (13yrs left)
CC Float                           1520
Total                             79120

Net Worth                        241055


Things I'd like to change are my gifting.  I think that $840 a year for presents is excessive.  That doesn't even include gifts between my wife, son, and me (which comes out of our personal spending money).  My DW's love language is gift giving, so I know it's going to be a hard battle to get her over it.  We pretty much give birthday gifts, anniversary gifts, fathers/mothers day gifts to our parents and grandparents.  Then we give christmas gifts for the same people as well as a few other random relatives.  Our siblings don't exchange gifts really. 

I'd also like to get rid of one of our cars.  My wife is home two days a week watching kids for a friend, and I work from home a different day.  That means that 3 days of the week, we don't need two cars.  My employer keeps promising to allow a three day telecommute, so I've been patiently waiting for that before broaching the subject with my DW.  I figured that would allow her to use the car 3 days of the week as she liked, and then she would be watching kids at home and unable to fit all the kids in either car (she watches 4 kids total).  I figure that about $4k a year would be saved by ditching her car.  Both cars are paid off as you can see, but I do put $250 a month towards eventual replacements.  I'd cut that in half if we had one car.  I'm not sure how going down to one car would affect maintenance, fuel, and insurance.  I feel like it wont be half, but I know it will be considerably less.  I do try to do most auto maintenance myself, (oil/breaks/roations).

So I guess I'd just like a budget health check, and any advice would be helpful.  My goals are early retirement (50-55), and just having real wealth so as to not need to stress out about money.  I feel comfortable where I am, but I always just want a little more.

[4alpacas]

With a few assumptions and your current savings rate for long term and retirement savings considered, it looks like you'll hit FI in about 30 years.  I think you're on track to hit your goal!  Congratulations!

[chicagomeg]

Why do you have taxable investments if you're not maxing out your tax sheltered options?

[FarmerPete]

Why do you have taxable investments if you're not maxing out your tax sheltered options?

Like I said, I am using my charitable giving to eat a lot of that tax burden.  It's giving I would do regardless, so instead of giving cash, I can give equities that have appreciated 50-500%.  It's a win/win.  Truthfully, I should be putting more into my Roth IRA.  I like the idea of having the money accessible, and a Roth gives me that.  In the last year, I had a roof replacement and my deck had to be replaced.  Even after insurance covered a portion of the deck, I still was on the hook for $11k between the two.  Luckily, I had that saved in cash.  I should have mentioned that until the end of this month, I've had most of my cash in a checking account(s) getting 3.5-1.5% interest, so it's at least been keeping up with inflation.  My bank is discontinuing their high interest checking, so I'm certainly planning on shuffling things around.

[chicagomeg]

Why do you have taxable investments if you're not maxing out your tax sheltered options?

Like I said, I am using my charitable giving to eat a lot of that tax burden.  It's giving I would do regardless, so instead of giving cash, I can give equities that have appreciated 50-500%.  It's a win/win.  Truthfully, I should be putting more into my Roth IRA.  I like the idea of having the money accessible, and a Roth gives me that.  In the last year, I had a roof replacement and my deck had to be replaced.  Even after insurance covered a portion of the deck, I still was on the hook for $11k between the two.  Luckily, I had that saved in cash.  I should have mentioned that until the end of this month, I've had most of my cash in a checking account(s) getting 3.5-1.5% interest, so it's at least been keeping up with inflation.  My bank is discontinuing their high interest checking, so I'm certainly planning on shuffling things around.

You're only putting $3k of your money/year into your 401k. I would be selling the taxable investments for expenses so you can afford to increase the 401k contributions. I understand what you're saying about the gifting, but 60k/4k is 15 years, and that doesn't include any appreciation in the account over that time. In the meantime, you're paying unnecessary taxes on your income by not maxing out the 401k and unnecessary taxes on any dividends being thrown off by your taxable account.

Otherwise, your budget doesn't look too out of line to me, but I am not the hardcore budgeting Mustachian. I just give out free tax advice to save you money so you can spend more! ;)