Life Situation: UPDATED 02/16/2016
Gross Salary/Wages:
$75,000 me (should be moving up to $82,000 on April 1st)
$67,000 her
$142,000 Salary ($25K increase in salary, $32k on April 1st estimate)
Pre-tax deductions:
14% 401k me + 3% emp match me
5% 401k her + 5% emp match her
Healthcare = $450 a month (Both of us, Med,Vision,Dental)
Other Ordinary Income:
Side Income = $6000-$8000 (cash) once a year. Not guarenteed every year.
Made $9,000 cash Dec 2015. May have it one last time at tail end of 2016
Current expenses:
Gym: $20
Car Insurance: $143
ATT Internet and DirecTV: $100 (FP on TV)
ATT Cell: $150 for both ($70 back from my company) = $80
Utilities (G,E,W): $280 (estimate)
Student Loans: $191 me/ deferred payment for her (add another $530 in July)
Food: $500 (includes dog food, $40 a month)
Gas: $200
Subtotal: $2,114 (starting in July)
Mortgage:
Went under contract on my house today yay! Bought for $331k in Sept 2014, under contract at $374k. Net proceeds ~ $37.5k
Expense Total Monthly: Estimating mortgage payment to be the same or slightly less $2,550 a month + $2,114 = ~4,664 in bills.
Assets:
Cash for downpayment: $17.5k + bonus in March ~$5k after taxes = $23.5k
Home: ~$374k
My Car (35k miles), paid off, Hyundai
Her car (110k miles), paid off, Chrysler POS
Misc assets, furniture, etc. $XXk dollars.
Retirement Accounts:
$85.5k in Vanguard IRA
$6.2k in 401k
Liabilities: (pretty much the same)
Loan.....................Amount........Rate
Student Loan 1........$24,467.10...6.80%
Student Loan 2........$9,050.48.....5.16%
Student Loan 3........$23,587.86....~4%
Student Loan 4........$5,422.35......~3%
Mortgage: $307k @ 4.125%, 30 year fixed. (Bought Sept 2014) (soon be different)
1. So, the big thing is that my wife and I decided that she will not be a SAHS, but she will return to the work force. Since she is a nurse, she will be able to work flexible hours and she is okay with sending a child to daycare for a handful of days.
2. Income went up $25K (fairly confident on $82k, but it might fall short to $80k, find out in March).
3. On top of 401k's, we are saving ~$3,000 cash a month. Very happy about this. It has made saving for a down payment MUCH easier. By the time we close (Mar 24th, leaseback until April 24th), we should have close to $67,500 cash to put onto a house.
Questions for you fine people
1. How are we doing?
2. Should we focus on Student Loans instead of putting extra in 401k (besides matching)?
Thanks for the update!
1. Congrats on the raise! That is excellent.
2. Be sure to pay off as much of her accrued interest as possible before she leaves deferment, so that it does not capitalize into the principle! This is a huge mistake many people make.
3. I personally am paying off all student loans above 5% until I add more to my 401(k) past the match. It depends on what you think is reasonable returns. I think argument could be made for your 5.16% loan, but I would want that 6.8% gone ASAP. You are not going to get market returns higher than that. I have a credit card that is scarcely higher than that (7.4%). That's a lot of money to have losing that much... I suppose the counter argument is, if you think the market is at a 'bottom' right now, you'll want to buy in so you profit on the upswing. I guess it largely depends on how confident you are of high returns.
I'm sure you've seen this before, but in case you haven't:
WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield. (yield is currently 1.78%, so anything above 6.78%)
3. Max HSA
4. Max Roth or Traditional IRA based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, swap #4 and #5)
6. Fund mega backdoor Roth if applicable
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield. (yield is currently 1.78%, so anything above 4.78%)
8. Invest in a taxable account with any extra.
WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks
1. Company match rates are likely the highest percent return you can get on your money
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.
4. Rule of thumb: trad if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between
5. See #4 for choice of traditional or Roth for 401k
6. Applicability depends on the rules for the specific 401k
7. Again, take the risk-free return if high enough
8. Because earnings, even if taxed, are beneficial
If you're comfortable going into it, I would love to know more about your decision process with her returning to work. I ended up going to work full time (also a nurse), but we had the SAHS discussion, so I'm curious about parallels/differences!