I have been reading MMM and other personal finance blogs for the last couple of years. We’ve made some changes in the right direction to cut spending, but I want to get more aggressive. I appreciate your reading through my case study and any suggestions/face punches you have.
General info: Both of us are working full-time, one with Master’s degree in history, one with Ph.D. in biochemistry. I feel we are underpaid for our education and experience. We have one child who is in full-time daycare, and it will be one more year before public school. We may have to move next spring to be zoned to a good school if we can’t win the magnet lottery. No family support network, minimal friends and neighbor support network. I spend 1 day per weekend helping my disabled mom, plus help her with an average of 3-4 health crises/long hospitalizations per year. No pets (except a fish). No debt. We have a 2012 Honda Fit that we paid for with cash (not entirely MMM “smart” car because it is automatic transmission). In the past couple of years we have made these changes to decrease spending: air-dry clothes, cut cable, cook mostly from scratch (kid has celiac disease so mostly gluten free), got rid of second car, got rid of gym membership. I would love to be FI in 10 years but with our current income and spending I don't see that happening.
SPECIFIC QUESTIONS
1) where can we cut spending?
2) how can we optimize our asset allocation?
3) how long until we could be FI if we made these changes?INCOME AND BENEFITS
JOB 1 SCIENCE EDITOR & WRITER AT LARGE HOSPITAL, entry level position after post-doc, gross income $41,288 annual, regular biweekly paycheck (26 pay periods). Small quarterly bonus of approx. $200, variable and depends on all employees’ performance.
Bi-weekly after-tax paycheck is $1505 before deductions. (($1505 X 26)/12 =
$3260 monthly after-tax.) Medical insurance for the family, FSA medical and daycare plans, and 403B savings get deducted from this paycheck pre-tax, leaving a current take-home biweekly paycheck of $293.92. Perks: Paid time off 2.5 weeks/year (includes vacation and sick leave), onsite gym free to employee and spouse, free bus pass. 403B plan through Fidelity, 50% matching up to 4%.
Job 1 benefits that get deducted from paycheckMedical insurance premium for family (2 adults, 1 kid): $251.87/paycheck x 26 = $6548.62/year
Dental insurance premium for 2 adults: $629.98/year
Vision insurance for 2 adults: $142.48 (will not renew this next year)
Life insurance for employee 2X base salary $52.78/year
Life insurance for spouse 1X base salary $24.96/year
FSA medical, elected $900 this year
FSA daycare $5,000/year
JOB 2 ARCHEOLOGIST, variable income based on hours worked, was $29,969 after taxes last year.
Average monthly after tax income $2,497. No medical insurance benefits, no retirement plan, one week of paid time off. Paid hourly. No overtime pay. Hourly rate is $25/hour for max 40 hour work week. Small company, paychecks occasionally arrive up to one month late, but otherwise dependable income. Perks: 1) $400 per diem paid monthly, not taxed and 2) work hours are flexible and in a pinch some work can be done from home (ex: if kid is sick or daycare is closed). There is always work to do, so income is variable because this is the job with the flexible hours and we have a young kid. 3) can work locally (this is very rare in archeology)
CURRENT SPENDING | | Monthly | Yearly |
| Total Expenses | 4464.04 | 53568.61 |
Fixed | Rent | 1375 | 16500 |
| Daycare | 715 | 8580 |
| Cell Phone | 30.25 | 363 |
| Landline/Internet (AT&T) | 88.06 | 1056.81 |
| Electricity | 129.51 | 1554.11 |
| Water | 33.48 | 401.81 |
| Netflix | 8.65 | 103.8 |
| Kid lessons | 68 | 816 |
| Spending Money ($40 each) | 80 | 960 |
| Car insurance | 85.5 | 1026 |
| Renter's Insurance | 13.83 | 165.96 |
| Car Maintenance | 18.14 | 217.68 |
| Backup Daycare copays | 6.25 | 75 |
| Expenses, Fixed subtotal | 2651.67 | 31820.17 |
Variable | Grocery | 700 | 8400 |
| Gasoline | 83 | 996 |
| Restaurants | 86 | 1032 |
| Doc, Rx, Copays, OTC Meds | 184 | 2208 |
| Clothing, Shoes | 100 | 1200 |
| Household Goods | 340 | 4080 |
| Kid diaper, toy, book | 24 | 288 |
| Haircuts | 33.5 | 402 |
| Family Fun (outings) | 25 | 300 |
| Gifts - social | 30.75 | 369 |
| Dues - work related | 5 | 60 |
| Work related social | 5.3 | 63.6 |
| Parking fees | 4 | 48 |
| Christmas | 62.04 | 744.48 |
| Holidays non-Christmas | 11.52 | 138.24 |
| Birthdays, family | 31.34 | 376.08 |
| Visits to family out of town | 86.92 | 1043.04 |
| Expenses, Variable subtotal | 1812.37 | 21748.44 |
ASSETS, RETIREMENT PLANSVanguard Traditional IRA: $93,590 total, $31,058 in VFIAX and $62531 in VBIAX
Vanguard Roth IRA: $73,586 in VFIAX
Vanguard Rollover IRA: $15,497 in VBIAX
(IRA subtotal = $182,673)Fidelity 403B $5,781 in FSTVX. Just increased contribution from 13% of salary to $700 per paycheck (if I can keep up this saving rate that will be $14,824 for the year, but I don’t know if we can cut our spending down enough to sustain this rate) + 50% of 4% match = 2% match.
Teacher Retirement System pension plan, no longer paying into it: if retire at age 65, get $435/month
Social Security Benefits in the future maybe – don’t know how or if to factor that in
Cash: $10,000 in Capital 360 account making 0.75% APY and about $3,000 in checking for bill paying
LIABILITIES $0Answers to questions:
Q: Why is grocery spending so high - it could be cut in half! A: I agree it needs to be cut in half and am working on that.
Q: Why is household spending so high? A: Household category includes all toiletries, we had to replace some kitchen stuff due to celiac diagnosis (and it had to be new because gluten truly does stay in the nooks and scratches of some things like cutting boards). We bought new unlocked cell phones and are using pre-paid plans through Airvoice and Ptel. Other items in household: printer ink, any cleansers including laundry soap, dish soap, new mattress and sheets and used bed for kid, bicycle repair.
Q: mismatch on after-tax income, spending and savings. A: I am looking over my calculations and I will post the correction here.
Q: can the science editor get work in industry? A: maybe. There are a few biotech companies here in Houston. While most of the biotech companies are on the East and West Coasts, it might be possible to find telecommuter work as an editor/writer from Houston. Also a lot of the biomedical supply companies and pharma companies have people working here because of the Texas Medical Center. Probably the best option is to keep the current full-time hospital job (need 3 years before vested in the 403 B and also to gain experience and recommendations, but at the same time to look for part-time contract work through industry. Then that could open the door to higher paying full-time jobs in industry. I am the science editor, so with the time constraints taking care of my mom I don't think I could handle too many extra hours right now. I might be able to take on contract work that I could do on the weekends and evenings. There are also some academic science editing opportunities I could take on as contract work.