Hello,
I have recently converted to Mustachianism. I took the usual route here: Got a very good-paying job immediately out of college, got married, bought a McMansion and new car for the wife, had a kid, got extremely stressed and realized my lifestyle needed a whole lot of face punches. I started reading the well-intentioned but weak-willed advice columns on the mainstream finance websites, but hungered for more control than the 40-year-career retirement plan they advocate. After voraciously reading "Your Money or Your Life", ERE, MMM, Mad Fientist, JLCollins, etc, I feel I have a pretty good grasp on the basics and a decent plan but I'm putting this out there for advice and also to keep myself accountable. I'm 27 years old and I know I have a long way to get to bushy mustache-level but I'd like to think I'm doing much better compared to my fellow millienials.
I'm working on increasing my Mustachianism and have a few unique circumstances, so bear with my ER-lite philosophy for now.
My first non-mustachian circumstance is that I actually rather enjoy my McMansion in the suburbs and will not consider moving. It is extremely well-placed near the great bike path system in the town, schools, grocery store, and only 2 miles away from my parents and 6 miles from my wife's parents (extremely convenient babysitting). The neighborhood is full of friendly young families that we have quickly developed a great bond with. It was a new build, and while I now wish we had saved up for a bigger down payment and/or reduced the square feet and fancypants upgrades, I don't regret the decision overall.
My second non-mustachian circumstance is that my dear little 1-year old was recently diagnosed with type 1 diabetes, which greatly improves my reliance on employer health plans. If we went private with the current options in our state the premiums/out-of-pocket costs would be devastating. We also plan on having a couple more kids to eventually bring the total family size to 5.
I accept that keeping the house and creating more adorable children will greatly increase the number of years I have to work, so take it easy on me.
Current financial picture:
Income: $135,000 salary as your friendly neighborhood pharmacist, bonus/holiday pay/stock options usually amounts to $6000/yr. Wife is SAHM for foreseeable future, especially with kiddo's medical needs.
Debts:
259,000 Fixed rate mtg @ 4%
13,300 Car @ 3.55%
5,700 Student loans @ 6.55%
Assets:
Liquid:
8,000 - Ally savings acct- emergency fund (Would like to get this to ~12,000)
5,500 - Vested company stock options. Don't have the spare change to buy-and-hold for tax savings right now, but also nervous about risk.
46,000 - 401k - 95% in low-cost index fund, 5% diversified bond fund
6,000 - Roth IRA - currently in Vanguard target fund, going to switch to VTSAX once possible
3,000 -Vested ESPP
4,200 - 529 plan
Not liquid:
320,000 McMansion (my best reasonable estimate - bought at 305,000 in 2012)
15,000 Wife's car (I know, I know, dumbest financial move of our young lives) - it's a fuel-inefficient Jeep Patriot that we will rapidly outgrow and need a minivan
5,000 My manual Mazda 3 which I plan on driving into the dirt
And a whole mcmansion full of consumer crap that I can't justifiably call assets. We're working on simplifying, I promise.
Current savings plan:
17,500 Max 401k (employer matches 5%)
6,500 Max HSA
5,500 Max Roth IRA
2,800 ESPP (15% discount with 6-month look-back)
$400/month into emergency fund until satisfied
Monthly take-home and expenses:
+6000 = 2 x biweekly paychecks (we've previously used the 2 'extra' paychecks for home-improvement projects and vacations, but dear wife promises that future extra checks and bonuses will be used to knock out debt)
+350 - currently have a sister-in-law renting out one of the McMansion bedrooms
-2100 - mtg - 1310 PI, 112 PMI, 50 ins, 25 HOA, 603 property tax (I can see all your mustaches falling off your faces in shock right now, I'M SORRY, OK?)
-350 - wife's jeep
-122 - student loan
-450 - Roth
-150 - 529 plan
-1100 - groceries/medical supplies (Brutal, I know. This is the result of many compromises between the Mrs. and I to reduce our eating-out costs while still having fancy pants food. Also, insulin for kiddo and trying to feed a 1-year old diabetic on a shoestring budget is impossible)
-250 - Gas/electric/water/sewage
-140 - Cell phone
-110 - Cable / internet
-200 - Car insurance/ maintenance, gas
- 70 - Gym/ pool / zoo memberships.
-50 - my personal entertainment fund
-600 - happy wife, happy life fund. Again, result of many compromises. This is her home-improvement, hobby, kid clothes, etc all-in-one discretionary budget.
This means I still have some discretionary money to throw around even before I go ultra-mustache. Currently putting $400 per month into emergency fund and had been using remainder for extra principal payments on mortgage - I really wanted to knock out PMI, at least. But now I'm rethinking to use that money on a spousal IRA (deductible) or other after-tax investments. Looking for advice here.
Short term Mustache plans:
Easy to do:
1. Decrease personal clown car habit. Picked up a nice 70's Schwinn Suburban for $20 at a garage sale and found I rather enjoy biking. It's an old POS but it gets me from point A to B. I'm working my way up to using it for almost all in-town errands. Looking to upgrade via Craigslist to a bike I can reasonably take to work.
2. Decrease cell phone bill - Currently on family plan for Verizon with a small work discount, but really looking at Republican plans once contract is up.
Not so easy to do:
Going to take some convincing of the wife-
1. Decrease wife's clown car habit - we agree that the jeep is a fiscal nightmare but can't agree on what next step should be. I'm looking at a 2004 Odyssey and she's looking at a 2014 Town & Country, so obviously we got some things to work out. At least she's open to increasing bike usage.
2. Cut the cable. I love my sports channels and wifey loves her silly shows.
Mid-term Mustache plans:
- Develop skills/side hustle/passive income. Many options here, contemplating rental properties.
- Increase savings rate in general
That's the basics for now. I will write again soon regarding a couple dilemmas
1. At work, do I climb the evil corporate ladder for mo' money, mo' stress, but quicker FI vs taking the more leisurely scenic route?
2. In a fancypants suburb where you're more likely to see a Lexus/BMW than a Toyota, how do I sell frugality to family and friends?
Let me know where I most need face punched and if you have any thoughts, especially on the classical debt-paydown vs investing situation. I constantly grapple with where to put my hard-earned dollars to best effect. Thanks!