Case study - My budget

[Giro]

I'm new and looking for any/all advice. 

I'm 40 years old.  I want to retire in 5 years.  (might be a stretch but I'm going to give it a try).  I'm a computer engineer and working as a contractor for the DoD.  My spouse and I maintain separate finances.  My DH is quite frugal but not really too interested in retiring early.  He plans to retire at 59.  He is retired military and currently working as a govt civilian.  He will be eligible for a 2nd pension at 59. 

Here's my monthly budget

Electricity - 150
Natural gas - 80
Water and sewer - 40
Waste removal - 20
Property taxes - 125
Car license, maintanance fund - 65
gas for car - 200
groceries - 150
dining out - 100
health club - 15
clothing, hair, hba - 200
cable - 185
cell phone - 165
daughter's private elem. tuition - 339
day care - 225
twins textbooks - 80
pet supplies - 50

I need to track my expenses because I am NOT spending this.  I am spending at least 800 more than this each month.  Husband pays all insurance - health, life, auto, home.  Husband buys most groceries.  We split property taxes and home maintenance bills.

The private school for my youngest is non-negotiable.  My ex pays me $520 a month for this.  The twins are in college and their tuition is covered via a 529 that I saved for them.  I pay their textbooks. 

Does anything really stand out?  I must be too close because I don't see how I can cut much of anything. 

I appreciate all responses.

[BarkyardBQ]

Welcome.

It helps to know your income, any investments including retirement contributions and balance.


First target is always your cell phone bill. Check out Ting, Republic Wireless, and my personal choice Page Plus.
Cable, that is high, do you watch it, can you cut down on the service? Could you keep internet and watch netflix, prime, hulu? Call them and ask them to match whatever the current promo 12 month price is or you'll switch providers.
Groceries look good.
Gas looks normal, but how could you cut this down. We decided to car pool, saved us 250 a month in gas and parking permits.
$80 a month for text books... could your twins get a part time job for this?
Sewer and Trash is usually a Quarterly Bill... are you sure this is monthly, or is it high enough that you divide it up?
$200/month on hair and clothing is excessive.
- Can you get your hair done for less or do it yourself?
- How about every 6 weeks instead of every 4?
- Can you shop at discount clothing stores and thrift stores... what could you possibly need to buy every month?
- My wife is an administrator and shops at Ross and Savers, gets brand new or almost brand new looking suits and professional clothing for 3-10 bucks, and name brand suits for like $30, never worn. She only shops once or twice a year for clothing when old things getting worn out.

Again, welcome and soak it up! :)

[dandarc]

Cell phone - how many lines are you paying for?  If that's for 5 phones, it's high but understandable.  For 1 that is way too much.  Wife and I have 2 phones for $25 / month total through Republic wireless, and you can do even better than that.

Cable - is cutting the cord an option?  We pay ~$55 a month for internet + $8 for Netflix and there is no shortage of TV watching in our house.  If anything, we watch more since making that move.

Gas - obvious answer is to drive less.  What kind of car is it? 

Utilities - am I reading this right that this is only half?  So in total you're paying $300 for electric, $160 for gas, $80 for water, and $40 for trash?  If so, that seems pretty high - turning temp down in winter / up in summer a few degrees could really help there.

clearly you've gotta figure out that $800 - that is by far your biggest line item right now.

[ShoulderThingThatGoesUp]

The electric seems high, though I don't know where you live. My wife and I are home all day, frequently working on the computer, and don't get nearly that high. Inefficient appliances? Things plugged in when you're not using them? Incandescent lights left on all day?

[DeltaBond]

You put $150 for your monthly grocery costs.  Is this accurate??

[DoubleDown]

I'm new and looking for any/all advice. 

I'm 40 years old.  I want to retire in 5 years.  (might be a stretch but I'm going to give it a try).  I'm a computer engineer and working as a contractor for the DoD.  My spouse and I maintain separate finances.  My DH is quite frugal but not really too interested in retiring early.  He plans to retire at 59.  He is retired military and currently working as a govt civilian.  He will be eligible for a 2nd pension at 59. 

Here's my monthly budget

Electricity - 150
Natural gas - 80
Water and sewer - 40
Waste removal - 20
Property taxes - 125
Car license, maintanance fund - 65
gas for car - 200
groceries - 150
dining out - 100
health club - 15
clothing, hair, hba - 200
cable - 185
cell phone - 165
daughter's private elem. tuition - 339
day care - 225
twins textbooks - 80
pet supplies - 50

I need to track my expenses because I am NOT spending this.  I am spending at least 800 more than this each month.  Husband pays all insurance - health, life, auto, home.  Husband buys most groceries.  We split property taxes and home maintenance bills.

The private school for my youngest is non-negotiable.  My ex pays me $520 a month for this.  The twins are in college and their tuition is covered via a 529 that I saved for them.  I pay their textbooks. 

Does anything really stand out?  I must be too close because I don't see how I can cut much of anything. 

I appreciate all responses.

Hi,

Well, there's a ton of fat in that budget. That is, you have a whole bunch of discretionary spending you could reduce or eliminate entirely: Cable, dining out, high gas costs, clothing/hair, high electricity bill, cell phones, etc. And clearly you need to find out where that additional $800 is going, because that's a lot of money to just disappear each month.

There's an old MMM post where he lays out that the cost of a monthly expense over 10 years is about 173 times the monthly amount. Consider that for a moment on all the discretionary or excessive items listed above -- if you add it all up, you are literally throwing away hundreds of thousands of dollars on discretionary expenses. In fact, I just put the numbers into Excel and found that by reducing your discretionary spending by $1575, you would have an additional $272,000 in 10 years. Decide if watching cable TV and having expensive hair cuts is worth $272k to you. If not, every amount you reduce from that discretionary spending will have you on your way to that $272k.

I'd recommend going through all the old MMM posts (have you read through his blog?) where you will find lots of amazing ideas for reducing spending without sacrificing any happiness or luxury. Good luck, and welcome!

[bacchi]

Cable! Reduce it to internet only and get hulu or netflix or amazon prime.

Gas. Can you carpool or take the bus or ride your bike or combine errands?

Your electricity seems high as well. How many kwh are you using each month? Are you electric heat?

You might want to take advantage of YNAB, a budget tracking tool, which is on sale right now at Steam:
http://store.steampowered.com/app/227320/

Download it first and try it. You then have 12 hours to buy it on sale if you like it.

[Future Lazy]

Since you know you need to track your spending, that's a good place to start. I prefer Personal Capital, but definitely try a variety of tracking system to find what suits you - even if it's a notebook, a pen, and writing down every expense.

What stands out:

Gas @ $200/mo

How far are you driving? What are you driving? How often are you making "little trips" to the store? I have a somewhat long commute (25+mi round trip) due to sharing a vehicle with my DH, and I still have a hard time exceeding $80/mo for all gasoline...

Groceries @ $150/mo

I initially overlooked this until I saw below where you state "Husband buys most groceries." Then it caught my attention. It's impossible to analyze this number without knowing how many more hundreds DH is spending on groceries.

Clothing/Hair/HBA @ $200/mo

I saw something similar to this the other day.

Clothing - $200/mo in clothing could buy:
That's four new shirts from a fancy place like Dress Barn, every month. 48 new shirts per year.
That's ten new pairs of pants from the clearance rack at Eddie Bauer, every month. 120 new pairs of pants per year.
Assuming a price range of $2-$8 per item, that's 25-100 pieces of clothing from a thrift store, per month. 300-1200 pieces of clothing per year...
If a package of Dickey's brand men's socks is $12, and comes with 6 pairs, that's 1200 new pairs of socks per year.
If a package of Hanes white women's underwear is $14, and comes with 10 pairs, that's 1714 new pairs of women's underwear per year.

Haircuts - $200/mo in haircuts could buy..
Exactly 160 $15 haircuts per year - divided among four people, that's 40 haircuts a year per person, or 3.33 haircuts a month, per person.
At $50 per trip, this would be 4 salon cuts per month, all year. A total of 48 haircuts, almost one a week.
At $50 per trip, this would be 4 cuts and colors at an Empire beauty school, per month, all year.

I don't know what HBA stands for, to be quite honest, but if it has to do with haircuts, salon treatments or clothes shopping as it's lumped with, I think it deserves equal scrutiny.

Cable @ $185/mo

Why do you have this? How many hours of TV do you watch, per week? What would your ISP charge you for internet access only? Usually it's around $60/mo, so let's assume that about $120 of this can be cut away.

That's a savings of about $1440 per year. 
If invested, this becomes $89,226 after 25 years.
If invested, this becomes $179,101 after 35 years


Everything else looks pretty much par for the course. Dining out can be questioned, always, but I think there are bigger fish to fry here. Cell phones also look pricey, but depending on how many people are on that $165/mo as to how expensive it actually is... For example, that times one or two people would be grotesquely expensive, but that times You, DH and all kiddos would be more acceptable.

As far as the $800/mo that you're unable to track down, that looks like...
A loss of $9600 per year. That's more than DH and I spend on housing.
If invested instead, that money becomes...
$150,861 after 10 years.
$594,843 after 25 years.
$1,194,009 after 35 years.
http://www.bankrate.com/calculators/retirement/roi-calculator.aspx

However, knowing if you can FIRE in 5 years depends on tracking your spending accurately, providing your income and assets in your case study. After all, FIRE is spending per year, x25...

Have you tried YNAB, Personal Capital, Mint, Learnvest, for tracking, or the Case Study spreadsheet provided in the sticky at this forum?

Check out these two recent case studies:
http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-pregnant-(yay!)-and-husband-laid-off-(boo!)/
http://forum.mrmoneymustache.com/ask-a-mustachian/reader-case-study-nate-shannon-looking-for-suggestions/

[skunkfunk]

+1 cable and cell phone! I'm not saying you have to get rid of them, aside from your mysterious $800 you don't track these fixed expenses are all within reasonable range (though taken altogether it's kinda high.) But trim that shit! You should be covering both of these for in the ballpark of $100/month total if you do keep them. Not $100 each, $100 between the two of them.

[Giro]

wow, thank you thank you for all of the replies.  I will answer a few of the questions.

No, this isn't half of the utilities, it's the full bills.  I pay all utilities and DH pays all of the insurance.  We split big things on the house....repairs, new floors, etc. 

The cell phone bill is for 4 lines.

The cable...ugh....my DH loves his cable.  Will try and get it lowered a bit.

I will first try and track down that $800.  Clearly, that is ridiculous.  I know a lot of it goes to the kids.  Something always comes up and they do both work but very low incomes.  They make enough for food, gas, a little spending money and that's about it.  They both had to get their wisdom teeth out and that was $500 each.  No way they could pay that so I needed to help. 

Also, no debt, house and cars are all paid off. 

INCOME - My income is $6600 a month net.  I also get that $520 from my ex.  I contribute $18000 a year to 401K and it's already taken out so it doesn't come out of the $6600.  I contribute $5500 to ROTH.  And I'm currently depositing $2000 a month into my taxable investment account. 

INVESTMENTS - 401K I have about $250K in that account.  I have an old 401K worth about $20K.  My ROTH is $10K.  My taxable account is only $20K.  I want to work on that one.  I have about $40K in my checking.  I plan to lower this and dump more in the investment account. 

I know it's not really looking too good for 5 year goal, but I want to increase my investments a lot this year. 

[FrugalSpendthrift]

Does anything really stand out?

Yeah, this:

I need to track my expenses because I am NOT spending this.  I am spending at least 800 more than this each month. 

Start using mint to figure out where your money is going.  Then you can make more rational decisions about whether moving up the retirement date is more valuable than what you are actually doing with your money.

[SwordGuy]

I'm sure you're happily married, but when it comes to things like this, what happens if you divorce?

Will you be able to find work again after 5 years off the market?  Can you handle the extra bills?

[Giro]

I'm sure you're happily married, but when it comes to things like this, what happens if you divorce?

Will you be able to find work again after 5 years off the market?  Can you handle the extra bills?

oooh  good question.  I never really thought of that.  The extra bills would be insurance, the rest of the property taxes and groceries.  Medical insurance would be the kicker.  In that scenario tho, no kids left in the house at all.  It wouldn't be steak and lobster that's for sure.  I guess I'll have to start being nicer to my husband.  I also like that retirement check he gets every month.

We are pretty much to old to divorce.  Neither of us are getting out of this alive.



 

[Future Lazy]

I think no debt, homeownership and 250k invested is a great start! Esp since you've also put your kids through college with 529s, it sounds like you've been a really valiant saver for some time, even if it's not FIRE level. Don't discount yourself, good job!

I would recommend, if possible, restructuring the bills between you and DH. Assuming his income is about the same, I would split all necessary expenses down the middle - Utilities, insurance, food, home repair costs, car repair costs.. Basically anything that keeps the machine turning. If his income is less but still decent (not like, minimum wage or something), I would weight things accordingly.

Then, eating out and discretionary spending is individual beyond that. That means the cable bill becomes DH's to pay for, since DH is the one attached to it.

That's how my husband and I have organized things, at least.

$165 for four lines seems ok to me, but if you went with 4 Republic Wireless phones with $25/mo plans, this might be cut back to $120/mo or so (including taxes). Just room for improvement.


You could totally FIRE in 5 years if:
Early retirement is just for yourself - DH is on his own for now (and not interested anyways?)
You get your spending under control - getting spending to around $2000/mo means your FIRE number should be around 600k, and you're already a quarter of the way there. And that would still be somewhat excessive, 24k spent per year. That's a little less than what you're at right now, without counting the $800/mo going missing.
If you follow a 75%+ savings model religiously for the next 5 years, you should reach FIRE within your goal. That should be easy to do, with some tracking and fat trimming. Over time, expenses around kiddos will change and disappear, as will the ones surrounding your commute (if you choose to quit working at FIRE).

You can do it! :)

I'm sure you're happily married, but when it comes to things like this, what happens if you divorce?

Will you be able to find work again after 5 years off the market?  Can you handle the extra bills?

oooh  good question.  I never really thought of that.  The extra bills would be insurance, the rest of the property taxes and groceries.  Medical insurance would be the kicker.  In that scenario tho, no kids left in the house at all.  It wouldn't be steak and lobster that's for sure.  I guess I'll have to start being nicer to my husband.  I also like that retirement check he gets every month.

We are pretty much to old to divorce.  Neither of us are getting out of this alive.

As my Mom used to say to my Dad, just before their divorce: "You have to sleep some time."

[BMEPhDinCO]

I think you are on track for FI, but here's a question yet unaddressed - even after accounting for all the spending you listed, plus the Roth, plus the $2k per month to taxable accounts, you are left with $2472 per month unaccounted for, NOT just $800 - where does all that go?  If you were to not change any spending amount (except that $800 into mystery land) and invested that full $2472 in addition to the aforementioned investments, you could add another $182k to the total saved in 5 years... that gives you a conservative withdrawal of $500 a month! 

[Giro]

DH and I make very close to the same income.  He makes slightly more than I do.  The expenses are actually very equitable as well.  He pays all of the insurance - medical, dental, life, home, auto.  And with twin 20 year olds, the auto insurance is outrageous right now.  I pay utilities, electric, gas, cable, cell, water, trash.  He probably pays a little more than I do.  The insurance is thru the military so we found it easier for him to just keep all of those things together and I pay the bills that come in the mail.  When the twins are on their own, we may start re-distributing expenses. 

And thank you, I have tried to save even when I was pretty darn broke and a single mother of twins and a baby.  That's why I think I may be able to get there fairly quickly.  I've never made this much money and I have everything paid off and all set up to start really saving.  There's nothing about my lifestyle that is extravagant except my car.  I do have a 2013 Nissan 370Z.  I don't drive it often.  I drive a 2000 Honda Accord as my daily driver.  Selling the Z would free up some cash that I could throw into my investment account.  And I am strongly considering it.  Once I get my spending leaned out, I will have to look into that. 

[Giro]

I think you are on track for FI, but here's a question yet unaddressed - even after accounting for all the spending you listed, plus the Roth, plus the $2k per month to taxable accounts, you are left with $2472 per month unaccounted for, NOT just $800 - where does all that go?  If you were to not change any spending amount (except that $800 into mystery land) and invested that full $2472 in addition to the aforementioned investments, you could add another $182k to the total saved in 5 years... that gives you a conservative withdrawal of $500 a month! 

Right now, it just goes into my checking. 

[dandarc]

I think you are on track for FI, but here's a question yet unaddressed - even after accounting for all the spending you listed, plus the Roth, plus the $2k per month to taxable accounts, you are left with $2472 per month unaccounted for, NOT just $800 - where does all that go?  If you were to not change any spending amount (except that $800 into mystery land) and invested that full $2472 in addition to the aforementioned investments, you could add another $182k to the total saved in 5 years... that gives you a conservative withdrawal of $500 a month! 

Right now, it just goes into my checking.

Does it stay in your checking?  Is your checking balance 5K higher now than it was 2 months ago?  If not, then you're spending it somewhere.

[Gin1984]

Your children's textbook cost is a little high.  Are they buying from the school?

[Giro]

Yes, the money stays in my checking.

They do not buy from the college and I do everything I can to find the cheapest books but there are ALWAYS one or two that you HAVE to buy from the bookstore.  It's usually college-specific books.  It's beyond frustrating but I do try really hard to get the cheapest books.  I compare all websites, I look for old editions, I rent, I sell back books.  College textbooks are just a little pricey when both kids take 5 classes each semester. 

I have started writing down every penny that I spend.  I'm going to reconcile at the end of 30 days and see what I've spent.  These numbers are budgeted numbers and may be off.  I want to have really good numbers. 

[Gin1984]

Yes, the money stays in my checking.

They do not buy from the college and I do everything I can to find the cheapest books but there are ALWAYS one or two that you HAVE to buy from the bookstore.  It's usually college-specific books.  It's beyond frustrating but I do try really hard to get the cheapest books.  I compare all websites, I look for old editions, I rent, I sell back books.  College textbooks are just a little pricey when both kids take 5 classes each semester. 

I have started writing down every penny that I spend.  I'm going to reconcile at the end of 30 days and see what I've spent.  These numbers are budgeted numbers and may be off.  I want to have really good numbers.

What are their majors?  And they should be looking for the cheapest books, not you, IMO.

[thedayisbrave]

Even if a full FIRE is a stretch at 45, you could semi-FIRE.  This is usually easier for those who are in the tech field as it seems there is a lot of opportunity for freelance work, esp if it has been your primary career and you already have a built-in network.  It'd also allow your investments to compound for a little extra margin of safety, while simultaneously giving you a little more day-to-day freedom to do more enjoyable activities.  Just something to think about.