Case Study - Early 30s with barely stubble needs investing direction

[z6_esb]

Life Situation: Married, filing jointly. Both 33.  No kids.  San Diego, CA

Gross Salary/Wages: $180,000

Pre-tax deductions: 12% 401k

Current expenses: I summed everything as one value.  We have done the Mint/YNAB thing and are working on it every month try to “find” more money to save. Not comfortable with the expenditures but we are actively decreasing them each month.

Assets: house is valued at $650K loan is $390K at 4%

Liabilities: car loans described below.  No CC debt or student loans.

Specific Question(s):  Our Roth IRAs are at Vanguard and in the process of shifting to Core 4 from Bogle Heads at the 80/20: https://www.bogleheads.org/wiki/Lazy_portfolios#Core_four_portfolios
My Fidelity 401k is in similar funds to the Vanguard accounts. We don’t have a taxable account. 

My questions are general b/c I have become overwhelmed and have started second guessing what I have set up thus far in my financial life.   I am looking for general guidance in order to get everything going in the right direction. We are talking about going to a financial planner to get set up.  I (We) decided that we don’t want to be stuck in office jobs for the rest of our lives so we are planning ahead!

Should I be investing in Roth or tIRA?  Should I open a taxable account?  I get conflicting arguments around the internets.  I have seen and read the order of investments but still don’t feel confident.

I have $30K in cash in a savings account. Should that be invested to a certain extent?

We have work provided health insurance.  Should I still do HSA?  Can I?

As you can see, very general questions.

Be gentle…

Category	Monthly	Comments	Annual
Mortgage	$1,874		$22,486

and is $2350 with property tax

Non-mortgage total	$3,665		$43,980
Loans:
Car 1	$401		$4,818
Car 2	$427		$5,127
Current Savings$25,000
Tax-deferred (e.g. trad. IRA/401k)	$190,000
Roth + HSA	$36,000
Other tax-advantaged investments:
Roth IRA	$917	Room to increase?	$11,000
Total Expense	$7,284		$87,411
Total to invest	$1,597		$19,160
Living expenses	$5,859		$70,312
Non-mortgage loans	$829		$9,945
After-tax investable	$1,597		$19,160

The Sum changes month to month a little

Groceries   $600.00 Home Supplies   $125.00 Utilities   $175.00 Auto Payment   $423.00 Auto Insurance   $200.00 Service and Parts   $40.00 Fuel   $300.00 Home Improvements (Repairs)   $50.00 Pet Food and Supplies   $75.00 Cell Phones   $90.00 Internet Access and Entertainment   $65.97 Alcohol and Bars   $375.00 Restaurants   $400.00 Coffee Shops   $100.00 Doctor/Dentist   $37.50 Haircuts   $50.00 Gym   $200.00 Beauty   $50.00 Clothing   $100.00 Travel/Vacation   $150.00 HOA Fees   $32.00 Entertainment (misc fun)   $25.00     Sum   $3,663.47

[former player]

I'll leave the US tax issues to others.

I'm wondering whether asking about your finances is a proxy for asking what you should be doing with your lives?  Because you sound like two pretty sorted individuals, with great income, only mortgage and car debt and significant savings.  You say that you don't want to be tied to the office, but what ideas do you have about what to do instead?  You might start looking outside the boxes of your upbringings and educations for an answer, if you don't have one already.

Your expenses are not at all mustachian, with an expensive house, extraordinarily expensive cars and high other living expenses - while still being comfortably within your income.  Diagnosis: hedonic adaptation.  Which brings us back to: what do you want to do with your lives, other than live in this very comfortable bubble? 

If you want to FIRE, the biggest thing you can do is bring your current expenditures down.  You currently have a net worth, including your house equity and excluding car debt, of $516k, which at 4% gives you a potential unearned annual income of $20k.  There are people here who have retired on that.  You list your living expenses as $70k per annum, which at 4% would require a net worth of $1.75m.  How long will it take you to accumulate the extra $1.23m that you need?  On the other hand, what could you cut your living expenses down to, what would be 25 times that figure and when could you get to that figure?

[z6_esb]

I'll leave the US tax issues to others.

I'm wondering whether asking about your finances is a proxy for asking what you should be doing with your lives?  Because you sound like two pretty sorted individuals, with great income, only mortgage and car debt and significant savings.  You say that you don't want to be tied to the office, but what ideas do you have about what to do instead?  You might start looking outside the boxes of your upbringings and educations for an answer, if you don't have one already.

Your expenses are not at all mustachian, with an expensive house, extraordinarily expensive cars and high other living expenses - while still being comfortably within your income.  Diagnosis: hedonic adaptation.  Which brings us back to: what do you want to do with your lives, other than live in this very comfortable bubble? 

If you want to FIRE, the biggest thing you can do is bring your current expenditures down.  You currently have a net worth, including your house equity and excluding car debt, of $516k, which at 4% gives you a potential unearned annual income of $20k.  There are people here who have retired on that.  You list your living expenses as $70k per annum, which at 4% would require a net worth of $1.75m.  How long will it take you to accumulate the extra $1.23m that you need?  On the other hand, what could you cut your living expenses down to, what would be 25 times that figure and when could you get to that figure?

Thanks for your reply, I appreciate it. <---Placeholder until I got some time

"I'm wondering whether asking about your finances is a proxy for asking what you should be doing with your lives?  Because you sound like two pretty sorted individuals, with great income, only mortgage and car debt and significant savings.  You say that you don't want to be tied to the office, but what ideas do you have about what to do instead?  You might start looking outside the boxes of your upbringings and educations for an answer, if you don't have one already."

We have discussed moving to lower COLA area (Ft Collins, Asheville NC,), renting our house out, and seeing what happens there. 

" Which brings us back to: what do you want to do with your lives, other than live in this very comfortable bubble? "
We want to be able to do what we want without having to depend on $X coming in each month.  I've thought about being a teacher or going back to school learn a trade.  My significant other wants to change fields at least.

[HappyHoya]

The car and house expenses together seem to be the biggest potential areas for making significant improvement. Do you live in a dense metropolitan area? If not, you should be able to reduce your housing costs. I live in an expensive city so I understand that a reasonable home price is relative, but if you live in a similar place and it would be difficult to reduce your housing costs, you should at least be able to reduce the car expenses. It sounds like you are not attached to your current jobs, which can be a big advantage. If you're really motivated to shorten your time to FI, you have the option to really shake things up and move, if that's what you need to do to reduce one or both of those major expenses. I agree with the PP that it really comes down to what you want out of life. This lifestyle isn't about being a cheapskate, it's about allocating resources to maximize your freedom and happiness. It seems like you have some exciting choices to make and a great opportunity ahead of you!

[boarder42]

you cant invest in a tIRA your income is far too high. roth is fine then taxable with rest

is your work provided health insurance a High Deductible Health Plan (HDHP)?  if so yes open an HSA if not you cant. if your work offers it go thru them as you will bypass FICA as well as regular taxes.

you really need to break your spending down above former player asked questions and you didnt really answer any of them

what are your goals.

[z6_esb]

you cant invest in a tIRA your income is far too high. roth is fine then taxable with rest

is your work provided health insurance a High Deductible Health Plan (HDHP)?  if so yes open an HSA if not you cant. if your work offers it go thru them as you will bypass FICA as well as regular taxes.

you really need to break your spending down above former player asked questions and you didnt really answer any of them

what are your goals.

No, work plan is standard HMO.

I answered some questions in edited post above.

Do you want actual expenditures? If yes,  I don't have that workbook with me. I'll upload later.

[boarder42]

yeah show your actual expenses we can help you cut them.

but based on what i see.. your house isnt that extravagant given the area

your cars are bat shit crazy and should be super downsized.

but thats what this site is about... minimizing expenses so we need to see where your money is going to help you come up with a plan for how to retire as soon as possible so you wont have to depend on income. 

[z6_esb]

yeah show your actual expenses we can help you cut them.

but based on what i see.. your house isnt that extravagant given the area

your cars are bat shit crazy and should be super downsized.

but thats what this site is about... minimizing expenses so we need to see where your money is going to help you come up with a plan for how to retire as soon as possible so you wont have to depend on income.

Rents are high too. It seemed "cheaper"  to buy house.

I'll post up my expenses this afternoon. Thanks

Sent from my SAMSUNG-SM-G850A using Tapatalk

[z6_esb]

Updated with expenses.   Thanks

Sent from my SAMSUNG-SM-G850A using Tapatalk

[BTH7117]

Groceries   $600.00 Alcohol and Bars   $375.00 Restaurants   $400.00 Coffee Shops   $100.00

As a fellow aspiring-mustachian in his early thirties in an expensive city, I sympathize that things just cost more in certain places.  That said, nearly $1,500 per month is TON of money for consumables.   The good news is this is an incredibly easy area to cut down dramatically.

Coffee should be the easiest one.  $1,200 per year on something that can be made at home for pennies.  Starbucks/Dunkin/whatever no longer exists.

Alcohol and restaurant expenditures are really, really high.  My wife and I used to go out to eat a ton, with just each other and with friends.  It really gets expensive.  Our trick is now when we go out, we have a light dinner at home first.  Then, at the restaurant, we have some drinks and an appetizer.  Usually much healthier and definitely much cheaper.  Also, is your home alcohol fancypants?  I held my nose and switched from single malt scotches to "whatever-is-on-sale-bourbon" and now the bourbon tastes fine to me.

Maybe try getting the $1,475 down to under $1,000 and then work down from there.

[Bucksandreds]

Groceries   $600.00 Alcohol and Bars   $375.00 Restaurants   $400.00 Coffee Shops   $100.00

As a fellow aspiring-mustachian in his early thirties in an expensive city, I sympathize that things just cost more in certain places.  That said, nearly $1,500 per month is TON of money for consumables.   The good news is this is an incredibly easy area to cut down dramatically.

Coffee should be the easiest one.  $1,200 per year on something that can be made at home for pennies.  Starbucks/Dunkin/whatever no longer exists.

Alcohol and restaurant expenditures are really, really high.  My wife and I used to go out to eat a ton, with just each other and with friends.  It really gets expensive.  Our trick is now when we go out, we have a light dinner at home first.  Then, at the restaurant, we have some drinks and an appetizer.  Usually much healthier and definitely much cheaper.  Also, is your home alcohol fancypants?  I held my nose and switched from single malt scotches to "whatever-is-on-sale-bourbon" and now the bourbon tastes fine to me.

Maybe try getting the $1,475 down to under $1,000 and then work down from there.

Another bit of advice on the alcohol and Bars section.  Bars/clubs are not fun to me anymore (I'm 34.)  They were awesome when I was 24.  Restaurants are so much more fun but we eat with coupons and at less expensive places.  I'll have more fun at Chipotle with friends getting a meal and one/two of their house made margaritas ($15-$20) for food and drink/s than I would dropping $50 on my dinner and another $30 at the bar.  Mustachianism is maximizing value so as to free up your life energy.  If the restaurants/bars are more valuable to you than your life energy then so be it, but I honestly doubt it.

What do you do at the gym that it's worth $2400 per year for the 2 of you?  I have weights and a treadmill in my basement and spend about $100 per year on parking and random indoor fees for soccer.  My wife spends about $400 per year on weekly super high end Barre classes and supplements that with free video classes at home and both of us are in excellent physical shape.  Even a family YMCA pass is around $1000 for the year.  When my kids are older that will put our family of 5 at about $1500 per year for 'gym.'  If you want more cash you should be able to replicate your workouts somewhere else for far cheaper.

[z6_esb]

Groceries   $600.00 Alcohol and Bars   $375.00 Restaurants   $400.00 Coffee Shops   $100.00

As a fellow aspiring-mustachian in his early thirties in an expensive city, I sympathize that things just cost more in certain places.  That said, nearly $1,500 per month is TON of money for consumables.   The good news is this is an incredibly easy area to cut down dramatically.

Coffee should be the easiest one.  $1,200 per year on something that can be made at home for pennies.  Starbucks/Dunkin/whatever no longer exists.

Alcohol and restaurant expenditures are really, really high.  My wife and I used to go out to eat a ton, with just each other and with friends.  It really gets expensive.  Our trick is now when we go out, we have a light dinner at home first.  Then, at the restaurant, we have some drinks and an appetizer.  Usually much healthier and definitely much cheaper.  Also, is your home alcohol fancypants?  I held my nose and switched from single malt scotches to "whatever-is-on-sale-bourbon" and now the bourbon tastes fine to me.

Maybe try getting the $1,475 down to under $1,000 and then work down from there.

good plan!  Explanations not excuses:

We make most coffee at home but on Sundays we like to go to this coffee shop on the beach with the dog and sit outside for most of the later morning.  Usually we go for walks too. 

We don't drink super -expensive alcohol but it adds up: having people over (bottles of wine or craft beer), go to a new brewery (hundreds in San Diego).  Going out to dinner and having friends over is what we do for fun.

[z6_esb]

Another bit of advice on the alcohol and Bars section.  Bars/clubs are not fun to me anymore (I'm 34.)  They were awesome when I was 24.  Restaurants are so much more fun but we eat with coupons and at less expensive places.  I'll have more fun at Chipotle with friends getting a meal and one/two of their house made margaritas ($15-$20) for food and drink/s than I would dropping $50 on my dinner and another $30 at the bar.  Mustachianism is maximizing value so as to free up your life energy.  If the restaurants/bars are more valuable to you than your life energy then so be it, but I honestly doubt it.

What do you do at the gym that it's worth $2400 per year for the 2 of you?  I have weights and a treadmill in my basement and spend about $100 per year on parking and random indoor fees for soccer.  My wife spends about $400 per year on weekly super high end Barre classes and supplements that with free video classes at home and both of us are in excellent physical shape.  Even a family YMCA pass is around $1000 for the year.  When my kids are older that will put our family of 5 at about $1500 per year for 'gym.'  If you want more cash you should be able to replicate your workouts somewhere else for far cheaper.

$200 is the combination of my SO's gym classes, bicycle maintenance (I cycle 100 miles per week), gym clothes, and other athletic stuffs...I got new soccer cleats from the accrued residuals and hiking stuff.

We started eating snack or a protein shake before we go out.  We now split a salad and split a main course...much cheaper.  Thanks for your comment!

It's not the food or drink that makes you happy, it's who you share the meal with!

[z6_esb]

The car and house expenses together seem to be the biggest potential areas for making significant improvement. Do you live in a dense metropolitan area? If not, you should be able to reduce your housing costs. I live in an expensive city so I understand that a reasonable home price is relative, but if you live in a similar place and it would be difficult to reduce your housing costs, you should at least be able to reduce the car expenses. It sounds like you are not attached to your current jobs, which can be a big advantage. If you're really motivated to shorten your time to FI, you have the option to really shake things up and move, if that's what you need to do to reduce one or both of those major expenses. I agree with the PP that it really comes down to what you want out of life. This lifestyle isn't about being a cheapskate, it's about allocating resources to maximize your freedom and happiness. It seems like you have some exciting choices to make and a great opportunity ahead of you!

We live in the 'burbs.  We're talking about moving to ditch a car but it's tough to imagine living in hilly SoCal without a car or public transport as options.

[boarder42]

Another bit of advice on the alcohol and Bars section.  Bars/clubs are not fun to me anymore (I'm 34.)  They were awesome when I was 24.  Restaurants are so much more fun but we eat with coupons and at less expensive places.  I'll have more fun at Chipotle with friends getting a meal and one/two of their house made margaritas ($15-$20) for food and drink/s than I would dropping $50 on my dinner and another $30 at the bar.  Mustachianism is maximizing value so as to free up your life energy.  If the restaurants/bars are more valuable to you than your life energy then so be it, but I honestly doubt it.

What do you do at the gym that it's worth $2400 per year for the 2 of you?  I have weights and a treadmill in my basement and spend about $100 per year on parking and random indoor fees for soccer.  My wife spends about $400 per year on weekly super high end Barre classes and supplements that with free video classes at home and both of us are in excellent physical shape.  Even a family YMCA pass is around $1000 for the year.  When my kids are older that will put our family of 5 at about $1500 per year for 'gym.'  If you want more cash you should be able to replicate your workouts somewhere else for far cheaper.

$200 is the combination of my SO's gym classes, bicycle maintenance (I cycle 100 miles per week), gym clothes, and other athletic stuffs...I got new soccer cleats from the accrued residuals and hiking stuff.

We started eating snack or a protein shake before we go out.  We now split a salad and split a main course...much cheaper.  Thanks for your comment!

It's not the food or drink that makes you happy, it's who you share the meal with!

yeah so why are you paying almost 800 a month to go out.  this is insane ... so is the gym cost.  your budget has so much fluff in it you have to make a personal choice now on whats more important restraunts and gyms and bars and cars or your life

[z6_esb]

yeah so why are you paying almost 800 a month to go out.  this is insane ... so is the gym cost.  your budget has so much fluff in it you have to make a personal choice now on whats more important restraunts and gyms and bars and cars or your life

Thanks for this! Brutally honest

[HappyHoya]

The car and house expenses together seem to be the biggest potential areas for making significant improvement. Do you live in a dense metropolitan area? If not, you should be able to reduce your housing costs. I live in an expensive city so I understand that a reasonable home price is relative, but if you live in a similar place and it would be difficult to reduce your housing costs, you should at least be able to reduce the car expenses. It sounds like you are not attached to your current jobs, which can be a big advantage. If you're really motivated to shorten your time to FI, you have the option to really shake things up and move, if that's what you need to do to reduce one or both of those major expenses. I agree with the PP that it really comes down to what you want out of life. This lifestyle isn't about being a cheapskate, it's about allocating resources to maximize your freedom and happiness. It seems like you have some exciting choices to make and a great opportunity ahead of you!

We live in the 'burbs.  We're talking about moving to ditch a car but it's tough to imagine living in hilly SoCal without a car or public transport as options.

I hear you, but if you want to make a change, consider an ebike. I don't even love biking (well, at least not compared to most people in this forum--I am a wimp about how it makes my butt hurt), but I LOVE ebiking. It's perfect for real people in slightly less dense (i.e. No public transit) and hilly areas. My ebike has probably saved/made me over six figures so far by how much it's changed my life.

[boarder42]

yeah so why are you paying almost 800 a month to go out.  this is insane ... so is the gym cost.  your budget has so much fluff in it you have to make a personal choice now on whats more important restraunts and gyms and bars and cars or your life

Thanks for this! Brutally honest

thats what we do around here its called a face punch. 

but some need the wake up call your 25% of the way there you found this blog

25% more by starting to cut the easy fluff

25% more earned by learning what truly is making you happy and cut some of the not so easy stuff

25% more by helping other learn what you've learned here and truly understanding the ins and outs of personal finance and how to maximize your life minimize your spend and the money you payout to the govt.