Author Topic: Case study- how to increase savings on 38k/yr?  (Read 9100 times)

marcela

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Case study- how to increase savings on 38k/yr?
« on: October 24, 2014, 11:07:33 AM »
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« Last Edit: October 06, 2020, 02:00:04 PM by marcela »

4alpacas

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Re: Case study- how to increase savings on 38k/yr?
« Reply #1 on: October 24, 2014, 11:25:13 AM »
The biggest issue you're going to face is your low income.  I would recommend looking for ways to increase your income as much as possible. 

Right now, you're estimating needing $70k and have $19k saved.  You need to save $50k in 3 years, or $16,667/year.  With your current budget, you have $514.68/month plus $919X2 (extra pay checks) for a total of ~$8k/year.  You need to cut $722/month from your budget. 

Groceries- $274/month $200 (net savings $74)
You have some wiggle room here.  Check out budgetbytes.com for inspiration. 

Restaurants-$120/month  net savings $120

General Shopping- $150/month  $25 (net savings $125)
This is insane.  We spend less and make 10x more. 

Gifts-$83/month $25 (net savings $58)
Break this down.  If your donations are important, I understand.  However, presents are not a necessity, especially when one person is a full time student.

Travel- We budget around $2,000/year  $0
Your husband is a full-time student.  This is a crazy amount to spend if you actually want to accomplish the things you laid out in your first post. 

With the cuts mentioned above, you're still $178.58 short per month. 

sheepstache

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Re: Case study- how to increase savings on 38k/yr?
« Reply #2 on: October 24, 2014, 12:22:07 PM »
I feel like your paychecks are too low. Are you getting a huge tax refund each year? I would adjust your withholdings so you get that throughout the year and earn interest on it. Also, you should be earning interest on most of that 19k in savings, even if the rates are low.

Agree with 4alpacas, your groceries are too high and the restaurants and general shopping are insane.

What is your husband studying? Can't he bring in any income?

Seņora Savings

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Re: Case study- how to increase savings on 38k/yr?
« Reply #3 on: October 24, 2014, 12:41:24 PM »
I feel like your paychecks are too low. Are you getting a huge tax refund each year? I would adjust your withholdings so you get that throughout the year and earn interest on it. Also, you should be earning interest on most of that 19k in savings, even if the rates are low.

Agree with 4alpacas, your groceries are too high and the restaurants and general shopping are insane.

What is your husband studying? Can't he bring in any income?

Her paychecks are

$1461
-$104 health etc.
-$13 parking
-$250 retirement
-$919 take home

$175 taxes, that's about 13% because the Roth money gets taxed.

I'm with 4alpacas on the cuts, although I might keep the visits to see your family, but still cut the gifts.

Health and Fitness- $102/ month includes doctors visits, medication (I have a chronic illness that requires expensive upkeep)

You gotta pay for meds, but are you trying to sneak by without telling us about a gym membership?

On the car situation: places that make you pay for parking usually have public transportation.  How much would this cost?  Also, if you carpool to work, why do you have two cars?  You could save on insurance and maintenance if you toss one of them.

What is your husbands money situation?  Everyone I know either pays to go to school or gets paid to go to school.


Dicey

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Re: Case study- how to increase savings on 38k/yr?
« Reply #4 on: October 24, 2014, 12:58:06 PM »
You've been given some good tips on cutting the budget, but I have another concern.

Reasonable goals are important. I see your timeline as unreasonable. Maybe I'm reading this wrong, but it sounds like you're trying to do this all by yourself.
You want to buy a house and start a family as soon as your spouse finishes school. I think that is a bit too aggressive. Why not live like students, saving as much as possible for another year or two after he graduates and joins the work force? Your 70k goal and perhaps more would be easily reachable that way.

AgileTurtle

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Re: Case study- how to increase savings on 38k/yr?
« Reply #5 on: October 24, 2014, 01:06:04 PM »
Your husband is a full time student that doesnt bring in any income? instead of cutting anymore why not have him do some sort of hustle? Or got to school part time and work full time. Not working for years regardless if it is because you are going to school is not how you get a good job.

Future Lazy

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Re: Case study- how to increase savings on 38k/yr?
« Reply #6 on: October 24, 2014, 01:30:06 PM »
...

The public transportation is pretty unreliable around here and the cost for both of us gets pretty close to what we're currently paying to park so we decided the convenience was worth it. I can look into any cheaper parking options but I fear the price difference wouldn't be much.

Cost to park - Cost for Public Transport = Positive income, period.

This conversation also needs to include:
Cost of car maint (even if it's from a trust for the husband)
Cost of gas
Cost of time sitting in traffic, which (esp for someone in school! Study on the bus!) could be better used reading/studying.
Auto Ins costs
Then it becomes (Parking + Maint + Gas + Time + Insurance) - Cost of Public Transport = Difference in expenses, more money to save.

Husband's school is paid from a family trust established for such. His car insurance/maintenance costs come out of the same, so I don't pressure him much on that. His car is much roomier than my two door so we use it on long trips where the dog and so on need to come with us.

Even if there is an established trust that pays for it, you're still spending money that doesn't need to be spent. Having a car is a luxury. Having a nice big road trip worthy car is also a luxury, and it sounds like you only use that cargo space once in a while - maybe less, if you're cutting back on the travel expenses. Consider borrowing or renting a car for trips.

Dicey

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Re: Case study- how to increase savings on 38k/yr?
« Reply #7 on: October 24, 2014, 01:41:35 PM »
You've been given some good tips on cutting the budget, but I have another concern.

Reasonable goals are important. I see your timeline as unreasonable. Maybe I'm reading this wrong, but it sounds like you're trying to do this all by yourself.
You want to buy a house and start a family as soon as your spouse finishes school. I think that is a bit too aggressive. Why not live like students, saving as much as possible for another year or two after he graduates and joins the work force? Your 70k goal and perhaps more would be easily reachable that way.

That was one of my concerns too. Taking in all the responses I've received so far I think I need to reevaluate the goals. If we remove the down payment from the list of goals, I'm down to a $30k goal with $19k already saved. This will cover replacing the car and be a good cushion for baby.
Also we plan to continue living at this type of income after he starts working and then chucking his whole salary at savings. Average salary right out of school is in the 50-70k range so we could quickly amass the funds needed for a house.

Wow, marcela! Thanks for the fast response. After FI, one might rightly ask if I had other things to do with my new found time. I visit this forum often because I hope I can hold up a lamp to help light the way for others, particularly women. I love the thought that my input may have made a tiny bit of difference to you. I also want to point out something I wish I'd said in the first response. Kudos to you for saving so much on your salary! 19k is nothing to sneeze at. I am positive that you will achieve your goals in life. I just don't want you to kill yourself in the process.

sheepstache

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Re: Case study- how to increase savings on 38k/yr?
« Reply #8 on: October 24, 2014, 01:48:12 PM »
I feel like your paychecks are too low. Are you getting a huge tax refund each year? I would adjust your withholdings so you get that throughout the year and earn interest on it. Also, you should be earning interest on most of that 19k in savings, even if the rates are low.

Agree with 4alpacas, your groceries are too high and the restaurants and general shopping are insane.

What is your husband studying? Can't he bring in any income?

Her paychecks are

$1461
-$104 health etc.
-$13 parking
-$250 retirement
-$919 take home

$175 taxes, that's about 13% because the Roth money gets taxed.


Ah, thank you. I think of "take home pay" as being everything post taxes so I missed that she clearly said the 919 was after those "deductions" (which aren't actually all tax deductions).

mlipps

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Re: Case study- how to increase savings on 38k/yr?
« Reply #9 on: October 24, 2014, 01:49:05 PM »
Do you do your own taxes? Make sure you're claiming the retirement savings credit if you're eligible for it. I assume you are based on your income but not sure how the trust impacts what husbands reports. Unfortunately, your husband isn't eligible since he's a full time student, but you still are, so you should be able to get 10-20% of your retirement savings contributions back as a tax credit, up to $2000 in contributions per year.

Also, are you claiming the Lifetime Learning Credit for husband's schooling? Once you max that out ($10k/year), see if your state allows deductions for 529 contributions. You can funnel the money you were going to spend on the school anyway through the 529 plan to save on state taxes (unless by trust you mean it's already in a college savings plan, but based on your comments that you also pay for the car from there, I'm guessing not).

Based on these two credits, I would be surprised if you end up owing any income taxes at all at the end of the year, unless the trust is throwing off significant income. Currently, your taxes are probably about $2000/year. The LLC alone is $2k and the retirement credit should minimum $200. Unfortunately, neither are refundable but they will at least cover your full federal liability. So, I would also recommend redoing your W-4 and claiming more exemptions. You can play with the IRS W-4 calculator (http://apps.irs.gov/app/withholdingcalculator/) to see exactly how many you would need to choose for them to stop withholding any taxes, but I think claiming 8 exemptions would be about right. No point in waiting until March to get your money back!

What kind of trip do you usually take for your anniversary? If you fly or stay in hotels, maybe you could cut or eliminate that expense by signing up for some travel credit cards w/good signup bonuses. Barclays Arrival, Chase Sapphire Preferred, and United Card are three good ones for starters. I like the blog millionmilesecrets.com for good info on this idea for beginners.

Oh! And be careful with that employer paid Master's degree! It's a great thing to take advantage of, but you'll owe taxes on the tuition payments over $5k/year just like if it were income in your pocket every month! You could be running in the red if you're not careful if your taxes increase substantially as a result. Depending how much the tuition is & how quickly you're taking classes, it might be worthwhile to switch to a regular 401k at that point to minimize the taxes you owe. Right now, you're in the 0 or 10% income bracket, so a Roth is an awesome choice!

MayDay

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Re: Case study- how to increase savings on 38k/yr?
« Reply #10 on: October 24, 2014, 05:56:45 PM »
Since you carpool together to work/school, I think the second car needs to go.  Sell that sucker and put the money in savings.  The car is only going to continue depreciating, and it sounds like you hardly use it. 

It sounds like your apartment costs are awesome, but if there is a chance to move to a similarly subsidized apartment, closer to school/work, I would take it, as your gas costs seem quite high to me.

You might want to shift your future salary expectations for your H down.  Lots of vets have trouble even finding a job, and find the salaries are quite low.  A quick google says in 2012 the average starting salary was 45k.  My understanding is that it has gotten worse since then. 

wtjbatman

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Re: Case study- how to increase savings on 38k/yr?
« Reply #11 on: October 24, 2014, 07:55:00 PM »
Hubby is in a full time vet school program that goes 8-3 or 5 Monday through Friday and then he's got another 3 hours of studying afterwards. Leading up to tests the study time ramps up intensely so there's not enough time for an extra job.

That's what part time jobs on the weekend are for :)

YoungInvestor

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Re: Case study- how to increase savings on 38k/yr?
« Reply #12 on: October 24, 2014, 08:10:38 PM »
Hubby is in a full time vet school program that goes 8-3 or 5 Monday through Friday and then he's got another 3 hours of studying afterwards. Leading up to tests the study time ramps up intensely so there's not enough time for an extra job.

That's what part time jobs on the weekend are for :)

I don't think the few bucks they'd earn this way is worth working 7 days out of seven. I had a weekend job in college and the 150-200$/w (roughly 15/h) I made wasn't worth the loss of weekends and opportunities to go out. At all.

mlipps

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Re: Case study- how to increase savings on 38k/yr?
« Reply #13 on: October 24, 2014, 08:16:14 PM »
Hubby is in a full time vet school program that goes 8-3 or 5 Monday through Friday and then he's got another 3 hours of studying afterwards. Leading up to tests the study time ramps up intensely so there's not enough time for an extra job.

That's what part time jobs on the weekend are for :)

He's in vet school, not community college. Come on guys, be realistic. How many people work during professional school?

wtjbatman

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Re: Case study- how to increase savings on 38k/yr?
« Reply #14 on: October 24, 2014, 08:23:23 PM »
Hubby is in a full time vet school program that goes 8-3 or 5 Monday through Friday and then he's got another 3 hours of studying afterwards. Leading up to tests the study time ramps up intensely so there's not enough time for an extra job.

That's what part time jobs on the weekend are for :)

He's in vet school, not community college. Come on guys, be realistic. How many people work during professional school?

Ones whose spouse only makes 38k but wants to save up 70k in two years.

Nudelkopf

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Re: Case study- how to increase savings on 38k/yr?
« Reply #15 on: October 24, 2014, 09:15:20 PM »
He's in vet school, not community college. Come on guys, be realistic. How many people work during professional school?
Everyone? (Or, everyone who's not FI.)

Pooperman

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Re: Case study- how to increase savings on 38k/yr?
« Reply #16 on: October 25, 2014, 06:20:41 AM »
You may be eligible for Saver's Credit on your taxes (up to $2000 depending on amount saved in IRAs and 401ks and how much your AGI is).

surfhb

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Re: Case study- how to increase savings on 38k/yr?
« Reply #17 on: October 25, 2014, 11:20:14 AM »
Planning to be a vet with hopefully his own practice and a family trust?

I think your future might be ok :).    Cut the travel for now but I think you're doing just fine....be patient
« Last Edit: October 25, 2014, 11:21:57 AM by surfhb »

abhe8

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Re: Case study- how to increase savings on 38k/yr?
« Reply #18 on: October 25, 2014, 12:24:12 PM »
Hubby is in a full time vet school program that goes 8-3 or 5 Monday through Friday and then he's got another 3 hours of studying afterwards. Leading up to tests the study time ramps up intensely so there's not enough time for an extra job.

That's what part time jobs on the weekend are for :)

He's in vet school, not community college. Come on guys, be realistic. How many people work during professional school?
[/quote/

In my med school we had to sign a contract saying we would not work any job while in school. I think for vet and med schools its unusual to also work. Some law schools are set up as night school so people can work days.

Gin1984

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Re: Case study- how to increase savings on 38k/yr?
« Reply #19 on: October 25, 2014, 03:56:22 PM »
...

The public transportation is pretty unreliable around here and the cost for both of us gets pretty close to what we're currently paying to park so we decided the convenience was worth it. I can look into any cheaper parking options but I fear the price difference wouldn't be much.

Cost to park - Cost for Public Transport = Positive income, period.

This conversation also needs to include:
Cost of car maint (even if it's from a trust for the husband)
Cost of gas
Cost of time sitting in traffic, which (esp for someone in school! Study on the bus!) could be better used reading/studying.
Auto Ins costs
Then it becomes (Parking + Maint + Gas + Time + Insurance) - Cost of Public Transport = Difference in expenses, more money to save.

Husband's school is paid from a family trust established for such. His car insurance/maintenance costs come out of the same, so I don't pressure him much on that. His car is much roomier than my two door so we use it on long trips where the dog and so on need to come with us.

Even if there is an established trust that pays for it, you're still spending money that doesn't need to be spent. Having a car is a luxury. Having a nice big road trip worthy car is also a luxury, and it sounds like you only use that cargo space once in a while - maybe less, if you're cutting back on the travel expenses. Consider borrowing or renting a car for trips.
Would the trust pay for your car if his was sold?