Author Topic: CASE STUDY: Newbie to Moustachianism, Hair On Fire, requests help from veterans  (Read 19394 times)

kittenwhiskers

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Topic Title: Reader Case Study - Could you please help a potential mustachian, currently in the larval phase, set priorities moving forward? I realize we have a pretty ridiculous combined salary for having this kind of problem. We used to be very frugal and got by on a shoestring budget, but things have somehow spiralled out of control and we have just recently realized our Hair Is On Fire and are trying to figure out a game plan moving forward.

Life Situation: IRS filing status Married Filing Jointly, no dependents, early 40's, residing near Seattle, WA. I (#1) work in Healthcare (maybe 75% job security) and my spouse (#2) works in a completely unrelated Transportation field (probably about 95% job security).

Gross Salary/Wages: Before any deductions: about $204,000 total projected for 2015.

Pre-tax deductions: :
#1: about $300/month for healthcare (this is charged whether or not we want the healthcare). Currently no deferred compensation contributions.
#2: about $300/paycheck for deferred compensation plan, $158 in another deferred compensation plan (pension??).

No other significant income, dividends, capital gains, or rental income.

Adjusted Gross Income: Projected $189,340 for 2015.

Taxes: (Edit: Adjusted to monthly), including both of us: Federal $3,754, no state/local tax (but about 10% sales tax), Medicare $214, Social Security $910.  Current withholding Married with a total of $1850 extra withheld per IRS calculator.

Current expenses: This is not how much we plan to spend moving forward, but the average of what was spent the past 12 months for a frame of reference. I know much of this is ridiculous to a true Mustachian, and need help deciding what the budgetary goal for each item should be. Any feedback and help would be greatly appreciated.

Average Monthly Expenses 8/2014-8/2015 (included 1998 numbers for comparison)

Category20151998
Mortgage$1,295
Rent$478
HOA
Property Tax$234
Mortgage Insurance
Home/Rent Insurance$33
Beauty Shop
Bicycle Maintenance
Cable TV$83 $28 (2015 recently reduced to $50)
Car Insurance$220 $162
Car Maintenance, Registration, etc.$564 $165
Charitable contributions$9
Child activities
Childcare
Christmas/Holidays$199
Clothing/Shoes$225 $156
College costs
Computer (paper/software/etc.)$24
Credit card fees$46 (2015 recently reduced to 0)
Dental Insurance
Dentist
Dining (Pizza, Restaurant, etc.)$921 $691 (1998 includes leisure, movies, etc.)
Donations/Gifts(already included in charitable contributions)
Dry Cleaning
Electricity$124 $39
Emergency Fundvaries
Entertainment$265
Financial Fees$46 $4
Fuel/Public Transport$416 $101
Gas/Oil for heating
Groceries$1,178 $493
Hair Care$12
Home Alarm System
Household; Maintenance$116 $103
Internet$60 (2015 recently reduced to $50)
Landscaping/Yard work(included in household maintenance)
Life Insurance(included in auto insurance plus post-tax deduction of $100 thru employers)
Lunches(included in groceries and dining out, generally we bring lunch from home)
Medical (Doctor, Hospital, etc.)$17 $47
Medical Insurance$346
Medicine (OTC + Prescription)$21
Miscellaneous$200 $545
Parking/Tolls$79
Pets$80 $194
Phone (cell)$139
Phone (landline)$35 $96 (1998 includes both landline and cell)
Recycling/Trash$141
School Tutition/Books/Etc.$95
Sports/Recreation$43
Subscriptions (paper/magazines/etc.)$9
Travel/Vacation$1,071 ($448/mo excluding a once-in-a-lifetime ridiculous vacation to Vegas)
Water/Sewer(included in recycling/trash)
Wine/Beer/Tobacco
Work/Professional fees$63
Total$8,396 $3,313
Average take-home pay$12,347 $2,926


(Please let me know if you need this broken down differently.)

  • I KNOW! Groceries have been excessive. However, #2 and I have actually lost about 80 lb combined by eating more fresh fruits, vegetables, and quality meats which are expensive. We also have a bad habit of only buying brand name stuff when available. We are in the process of cutting this down by only buying good-looking meats that are also on sale, and taking a really close look at generics and bulk foods. We'll see how this category looks at the end of September!
  • Total does not include student loan or IRA/deferred compensation contributions.
  • I cannot tell you how incredibly liberating and giddy it felt to be completely out of credit card debt for the first time in 7 years! It made me realize how much life energy was being depleted and how much stress is generated every single morning when we wake up and realize we have all this debt. Now I want what you have: No debt, including mortgage! I don't mind working, but it would be nice to keep what we earn.

Mortgage refinanced 8/2014, 4.375% interest. Total: $1,330.86, P&I $998.57, County tax $233.72, Hazard Ins $68.83, Escrow overage $29.74. Principal balance $196,446.95, Mature date 9/2044. Current value about $278,000 according to Zillow.

Assets:

Savings: A dismal $1,800 in savings, earning 1% interest.

Retirement:
#1 does not participate in deferred compensation plan because there is no match, but has about $55,000 in a 401K from a previous employer and $31,000 in a Rollover IRA and $12,000 in a Roth IRA (the IRAs are the company match portion from a previous employer). Pension value of approximately $550/month at age 65, depending on how it is drawn (single life annuity, etc.)
Retirement Allocation: Considering all 3 retirement accounts, 71% in Vanguard Total Stock Market Index, 12.8% Vanguard Extended Market Index, 8.7% Vanguard Total Bond Market Index, 5.2% Vanguard Total International Stock Index, and 2.3% in former employer's stock.
#2 participates in deferred compensation plan through work, $300 per paycheck, current balance $16,000, T Rowe Price Target 2035 Fund. Also has a pension and a Roth IRA, $100/month, current balance $21,800, Vangard Target 2035 Fund. $158 of pre-tax deductions per paycheck goes to a separate retirement fund, we're not sure what that means, maybe pension??

Liabilities:

Student Loans: original total $129,000, currently owe $108,000 at 6.55% interest with autopay. First payment on schedule in 2012. Originally set up for 25 year payment plan, currently on 10-year payment plan, but my hair is on fire and this debt is eating away at my well-being every moment it's there. Monthly payment currently $1527.10, payoff date 3/2023.

Car loan: Fancy truck purchased for #2 in 11/2013. Original owed: $39,704.50 at 2.59%, $707.05/mo and $27,079.99 remaining on the 5-year loan. (I am awaiting the expected face punch, but this is currently non-negotiable with anti-mustachian #2.)

Credit cards: Paid off all $39,000 in credit card debt over 9 months (YEAH!!). Available balance: about $89,000 total.

Specific Questions:

1) Taxes. Normally we keep our W4's set to "Married but withhold at the higher single rate" so we get a windfall at tax time, but this year I have been re-adjusting every 3 months or so using the IRS calculator to try to minimize any tax refund or bill. Would it be better to continue as we are, increasing/decreasing income tax withholding, or to boost deferred compensation contributions? How much would that affect our take-home pay? We haven't been able to deduct student loan interest due to income.

2) Priorities. I know we have a dismal amount of savings and this is stressing us out. We are thinking maybe a goal of about $27,000 emergency savings then start paying off student loan, then car loan? What do you think? How much emergency savings would you recommend, and should we start with this or delve right into student loans? I figure the car loan is a very low interest rate and should probably be paid off after the student loan. However, it would be nice to have that extra $707 a month to put toward student loan payments...

3) Transportation. #1's car has 285,000 miles on it (2002 Toyota Camry) and will likely need replacement soon. We are currently shoveling about $4,000 a year into various repairs. It's also a V6 and requires premium gas according to the manual. I tried putting 87 octane in there one time and it ran terribly and seemed to threaten suicide. #2 is concerned about #1's safety and would like something newer and less likely to get its driver killed during their current ridiculous-35-mile-one-way-highway-heavy-traffic commute. #1 would like something with better mileage and/or otherwise lower fuel costs. #1 knows this commute is absolutely ridiculous, but is extremely concerned about what would happen if they switched jobs and it didn't work out, as there was an extremely bad situation at a brief employer in the past. So #1 is currently stuck with the ridiculous commute, at least until the loans are all paid off. #2 has a relatively short commute and the ridiculously fancy gas-guzzling truck is currently non-negotiable. For #1, maybe something 3-year-used? Not sure what to do at this point.

4) Other. Whatever other suggestions you have would be very welcome. Maybe I don't even know what questions to ask...
« Last Edit: September 17, 2015, 06:12:20 AM by kittenwhiskers »

Kaikou

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I haven't read everything yet, but welcome. Looks like you laid out a full piece of cheese ;)

rpr

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Welcome.

Start by using the case study shovel and do a better categorization of your expenses.

The bad thing is all the debt.

There are a few good things.
-- you have a big shovel in the form of good salaries.
-- your essential expenses I.e. House mortgage is low.
-- most of your big  expenses are in the discretionary areas. That food budget for two should be way down.

It is doable. Expect resistance from #2. But lead by example. Meal plan, shop with lists, cook at home, pack lunches for both #1 and #2.

MDM

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Start by using the case study shovel and do a better categorization of your expenses.
+1

kittenwhiskers, welcome to the forum.  There is a good chance you can get some good comments here.  Some rewriting of the OP will help.

E.g., it's unclear whether "pay period" is biweekly or semi-monthly.  If you can convert things to monthly equivalent (either using the case study spreadsheet or roll your own calculations) it will help readers.  Also, "Aim to have “Miscellaneous” somewhere ~2.5%.  Much lower and you may be providing too much detail..." and any other pertinent suggestions from http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/.


MrsPfennig

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Welcome! You have a lot of debt but you have a big shovel. I see a lot of unneccessary spending especially your high food bill. Also reevaluate if cable, etc. is neccessary. We have cut off our landline and that alone saves us 360 Euro a year. So many little bills add up over the year.

kittenwhiskers

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Thank you for the feedback. Updated numbers with monthly income information and used the categories listed in the spreadsheet. I agree the total for groceries and dining out is ridiculous, but I don't know what the goal should be. We are shopping more at Winco and Costco now and only getting a few things from other grocery stores, and we have also decided to only eat out twice a month at reasonable places.

We recently reduced our cable and internet bill to the minimum we are currently comfortable with, decreasing the total for these services from $160 to $100 per month. We are currently considering bundling with satellite service or switching to DSL to see if we can save any more on the internet portion, but DSL would require re-wiring since we have ancient phone lines. I like to have a standard phone line available in case of emergency.

Suggestions/comments are greatly appreciated!


thedayisbrave

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Wow, okay.  You paid off $39k in credit card debt?! This SL should be a breeze :)

Some low-hanging fruit:
-Christmas/Holidays: You spend $2.4k a year on holiday gifts? What do you buy? Who do you buy it for? Either reduce the # of people you are buying gifts for or reduce the amount of $ spent per person.  It's nice that you are generous, but you need to put on your own oxygen mask first.
-Clothing/Shoes: Again... what do you buy? Try shopping at thrift stores if you have to.  I've found some really nice items there.. for example, my main work blazer (still had tags) was $3 at Goodwill. 
-Financial Fees: What is this? ATM Withdrawal fees? Stop it! That's an easy peasy $46 extra a month that can go to savings/debt paydown.
-Landline: Get rid of this.  Yesterday.

Besides that, I think food is your greatest enemy here.  You spent $1800 a month.  What the heck do you spent almost 2 grand on a month for food only? What are you buying? I would consider looking through the numerous grocery threads on the forum and reading through those - just do a search. 

I like going out to eat, so I can kind of feel your pain.  How much would you save by going out to eat only 2x a month? What do you typically order? 

lbmustache

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Cable TV   $83 (recently reduced to $50): Can you drop this? Get SlingTV for $20? Netflix?

Computer (paper/software/etc.)$24 :  Almost $300 a year in paper and ink? What software are you purchasing?

Dining (Pizza, Restaurant, etc.)   $921 : This is what's killing you

Fuel/Public Transport   $416 : Crazy high but I see someone has a truck ;)

Groceries   $929 : Ok, I gotta ask - what are you two eating?! $2k a month on food???

Miscellaneous   $450 : What gets dumped here?


Pets   $80 : How many pets? May be some ways to trim this down a bit ($50-$60?)

Phone (landline)   $35 : Get rid of this

Recycling/Trash   $141 : This seems really high to me.



K-ice

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Travel/vacations $1071 per month!!!

This and Christmas really stood out. I think those amounts should be your annual not monthly budget while your hair is on fire.

Dining (pizza) $921

Dining out is also rediclous. It doesn't look like these are even quality meals. Buy frozen pizzas on sale and treat yourself to one nice dinner out per month. Max $80-100! Order something original that you can't make at home and eat it slow :).

Does #2 make at least $700 more than you per month? Since the truck is "not negotiable" I would many take it from their budget first. If they have fun money fine, but that payment would not fit in my family budget. (Unless it was for only 1 year :) )

I hope you can make some changes ASAP.

Travel & dining out are an instant 2K per month or $24,000 per year. That is enough savings for you to "sponsor" an entire MMM family. ;)

midweststache

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1. We live in a HCOL area (Chicago, so similar prices to Seattle) and we spend ~$750/month on groceries AND dining out for two people. Granted, that's much higher than most people on this forum, but shooting to cut your food bill in HALF would be a good start--and save you almost $1,000/month. Look at some of the other forums for good suggestions on meal-planning and grocery shopping. (This is a recent discussion that may be relevant: http://forum.mrmoneymustache.com/welcome-to-the-forum/i-need-help-from-fellow-frugal-healthy-eaters-groceries-are-killing-us!/msg788896/#msg788896)
Savings: $1,000/month

2. Unless you are starting a new job and need to build a professional wardrobe, I recommend joining the "No Clothes Shopping 2015" in the "Throw Down the Gauntlet" sub forum (http://forum.mrmoneymustache.com/throw-down-the-gauntlet/no-clothing-shopping-in-2015/msg783777/#msg783777). $225/month for clothes is a lot; this forum might is helpful not only for not buying clothes but getting to where that shopping impulse is coming from.
Savings: $200/month

3. What are these "Financial Fees" and why do you have them? Get rid of ATM charges, bank overdraft fees, annual fees on credit cards (unless you balance that out with point churning), or anything else to that effect.
Savings: $46/month
 
4. Drop the landline and switch to lower-cost cell-phone plans. Republic Wireless has some great options with smart phones, if that's a necessity to you.
Savings: $125/month

5. Figure out what you're spending $450 on in your Miscellaneous category. Reduce it to $100 as a start.
Savings: $350/month

6. School/Tuition/Books - Is one of you in school? Or is this just how much you drop at B&N a month? Check out your local library--I've been getting ebooks free to my Kindle from them for about six months now, and it's awesome.
Savings: $75/month

Total saved with the above changes: $1,796

7. Work/Professional Fees - Can you say more about this? If it's not a monthly union due or the like, it might be worth re-assessing.

8. Student Loans. I feel ya, we're at 7.125% for about $50,000. If you can't refinance to a lower rate (check out SOFI, D&B Bank, etc.), then take the extra $1,000 you're saving from your food spending and throw it at the loans. The money you'll save in other areas can go to a savings/Emergency Fund buffer.

Specific Questions
1. I'm less anti-tax refund as others on this forum, but we throw our entire refund to student loans. I highly suggest you do the same.

2. If you're not using YNAB, I suggest you invest in that $60 (which would be a little over half your Miscellaneous category for September, since you're cutting that, right?) Build up a buffer (this month's income pays next month's bills--YNAB Rule 4) and then siphon all extra income to debt. Given your job stability, you seem very safe with a 1-2 month emergency fund.

3. Buy a 5-year old used Prius or other safe, gas-efficient vehicle. Seattle should have a ton of older, efficient vehicles for sale (dense population, lots of commuting, socially-conscious left-leaning population... doesn't everyone there drive a Prius?) Safety is a relative term; as long as your car isn't trying to sabotage you, your safety is basically dependent on your driving and the driving of others around you.

Question: In a Income=X, Expenses=X, what is your net income and your monthly expenses? Do you have a surplus, or are you accounting for every penny below (or, horror of all horrors, are you spending more than you have coming in each month?) With mortgage, car payments, student loans, and other monthly expenses accounted for differently in your case study, I couldn't quite get what your income/expense was each month.

*Edited to include total savings with above changes.*
« Last Edit: August 31, 2015, 09:30:26 AM by midweststache »

midweststache

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Travel/vacations $1071 per month!!!

This and Christmas really stood out. I think those amounts should be your annual not monthly budget while your hair is on fire.

Yeah, I second this. Your vacations should be stay-cations for the foreseeable future. Even cutting this to $200/month (which leaves you with $2,400 - a nice trip down the coast to CA or a cheap all-inclusive--with flights--in Mexico) would be huge. Savings: $800/month.

Malaysia41

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Pay off your debt then build emergency and retirement funds.  If at any time employer matches contributions, then get the match.

little_brown_dog

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+1 to the other suggestions.

The food costs are most concerning to me as they indicate an ongoing, daily struggle with excessive spending/ineffective planning.

Spending close to $2000/mo on dining/groceries is craziness- this is more than your mortgage and property tax! I second cutting this in half immediately. $1000/mo for food is an extremely generous budget and will allow you to eat out plenty and buy expensive cheeses and organics if you prefer. I suspect your grocery budget is so high due to ineffective meal planning as opposed to high food costs themselves. Plan meals for the week, shop with a list, stick to that list, and then don't go back to the store until the next week. This should be completely doable with a budget of $600 for the month.

Dining out  - limit yourself to 1 restaurant/take out per week. Even if you blow $100 a week at said restaurants (you shouldn't fyi), you will still only be spending $400 instead of $900+. Again, extremely generous and unlikely to cause you to feel deprived in any way.

K-ice

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Hi Kitten,

I hope you are starting to get excited at the savings you can make.

I know one of your questions was where to prioritise?

Try this spread sheet:

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

Plugging in your current payments things will eventually get paid off in 7.5, 15.5 and 3.4 years for your student loan, mtg and car respectively. And cost you $175K in interest payments.

Add $2000K per month to the payments and set it to avalanche (greatest interest first).

Now you can pay off in 3.4, 8.1 and 3.4 years respectively. Interest payments are now down to $86K. 

But you will be debt and mortgage free in 8 years.

Now, show this plan to #2 & start getting more excited!!!

PS. There are other calculators on that site and I would find one of the savings ones and try to find another $1K to put into savings. With your large incomes this should be possible. Some would argue not to rush the mortgage and save more sooner.  Your call.

2ndTimer

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I am also half of a couple who lives near Seattle and you are  paying WAY TOO MUCH for food.   Things I do that keep our food budget around $300/month for the two of us.

1.  Learn to cook whatever you are going out for.  In the past few years, I have mastered pizza, flat bread and hummus, Chinese Roast Pork, steamed dumplings, home made pasta, souvlaki and enchiladas.  Pick the thing you crave and learn to make it better than a restaurant.  It is very satisfying.   Don't try to do it all.  Pick one thing and beat it into submission.  Then when you find yourself craving something else do it again.

2.  Plan ahead.  We rarely leave our house without a snack or two packed somewhere.  If we are going together it is often a full scale picnic complete with thermos of home brewed coffee.  When I travel by myself I carry an individual rice crispy treat from Grocery Outlet.  I bought a stack of them when they were 6/$0.99.  That means each one costs 0.18.  Not much to keep me out of a restaurant.

3.  Pack lunch every day.  Only an important lunch meeting should stand between you and a packed lunch.  It works well to do this before you go to bed.  That way there is no thinking in the morning when it is hard.

4.  Invest in a slow cooker if you don't have one.  Try the thrift store for this.  If you know you have Italian Pot Roast or chili to come home to you are much less likely to stop for food en route.

5.  If you haven't found Grocery Outlet yet, go and look.  I just came home  from there with another 10lb. of excellent cheese for which I paid roughly $2.00/lb.  Would have bought more but fridge is still full of cheese. 


wordnerd

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Welcome! You've gotten a lot of great advice so far, especially on your dining, travel/holidays, and clothing categories. Those should all be cut drastically. Consider cutting cable too, but this is small potatoes compared to the $2K a month on dining.

To your prioritization question, your student loans are at a much higher interest rate than your truck loan. Unless you're paying off the truck loan in order to sell (which would be great, but sounds like a no-go with your SO), I would focus on the student loans before the truck loan. Emergency funds are a bit of personal decision. You have $89K in credit card space. That could partially work as an emergency fund IF you could pay off the balance quickly. This should be feasible with your large incomes IF you control your spending. You can also withdraw contributions from your Roths penalty free in case of emergency (before paying yourself back, of course). I'd build up an emergency fund of a couple months of living expenses (reduced living expenses) and then throw everything at the student loans.

The good news here is that you have high incomes and a lot of waste. That means you can turn the ship pretty quickly if you want to. Good luck!

Mother Fussbudget

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Welcome!  I love the slow-cooker idea, but suggest either a rice cooker to do both rice cooking & slow cooking, or a CostCo pressure cooker to do slow-cooking FAST. 

More places to save...
Internet $50 - not bad for Seattle!
Cable - cut the cord, sign up for NetFlix, or record over the air using a Windows 7 laptop and Windows Media Center.
Phone (landline) $35 - drop, or convert one of your cell phones to use the home number (one-time $15 cost).
Phone (cell) $139 - switch to Ting, Republic Wireless, or Airvoice.  You can either bring your phones with, or sell them & buy new devices. Either way, you can get this down to $60/month and still be 'unlimited'. Try cutting back to a lower data plan, and going prepaid.  I'm on the $20/month Airvoice plan ($10/month for 2 phones).  I use mostly wifi at home and at work, and infrequently turn on cellular data for use in-the-car. And if I need more... whatever... for the month, I pre-pay an additional 10 bucks. 

REALLY save by weaning yourself from high-speed cellular data - experiment for a month by turning off wireless data, and see how many times you find yourself wanting to turn it on.  When that happens, decide if you can wait until you get home, or go to a Starbucks/Panera/Library.  If you absolutely can't wait, turn on cellular data, do whatever it is, then switch it back OFF.

In any case... welcome to the neighborhood!  There's frequently pie, and/or beers, so sign up for the meetups.

fb132

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Before even thinking of going on vacation, you two should really get rid of your debts asap. You guys make too much money to be poor. Vacation should be off your list for now, go somewhere near that won't cost you an arm & a leg if you really want to go on vacation. Samething for your dining and groceries, I mean 929$ for dining, that is total insanity!!!! Like everyone else said, dump your landline phone...I won't go any further than this because I think the other forum members have given you good ideas here. The bad news is that you have shit loads of debt, the good news is that you make a shit load of money and I have hope for you, you can eliminate all this debt, it will take a few years, but if I were in your shoes, I would cut 90%+ of all unecessary expense. Now I don't know if your Spouse is with you in this, but if you are able to cut all those unecessary expenses, you should be able to pay it all off in 2 to 4 years max.

One thing I have noticed is that you have a very long list of expense, you should cut your expenses enough that you have a very short list. There are too many hands going into your wallet.
« Last Edit: August 31, 2015, 06:09:24 PM by fb132 »

MDM

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Nice editing on the OP.  Much more understandable, as one might guess from the very good suggestions already made.  To your specific questions:
1) Taxes. Normally we keep our W4's set to "Married but withhold at the higher single rate" so we get a windfall at tax time, but this year I have been re-adjusting every 3 months or so using the IRS calculator to try to minimize any tax refund or bill.
At your income, if you can get within a few hundred dollars refund or to pay when you file Form 1040, call that "good enough."  As I think you know, a large refund is definitely not a "windfall" - it a a return of a 0% loan you made the IRS when you have the SL lenders charging you 6.55%.

Quote
Would it be better to continue as we are, increasing/decreasing income tax withholding, or to boost deferred compensation contributions?
Either more deferred comp or faster payment of the 6.55% loans - it's a close call.  See "Whats and Whys" below.

Quote
How much would that affect our take-home pay? We haven't been able to deduct student loan interest due to income.
The spreadsheet where you got the expense categories should give you a good estimate of how things will affect take-home pay.  Note that it calculates your annual tax liability and assumes your withholding amount matches it.  Also note that if the two of you can put an extra $36K/yr into 401k (or similar) plans, you will be able to deduct ~$550 in SL interest (if I transcribed the OP numbers correctly).

Quote
2) Priorities. I know we have a dismal amount of savings and this is stressing us out. We are thinking maybe a goal of about $27,000 emergency savings then start paying off student loan, then car loan? What do you think? How much emergency savings would you recommend, and should we start with this or delve right into student loans? I figure the car loan is a very low interest rate and should probably be paid off after the student loan. However, it would be nice to have that extra $707 a month to put toward student loan payments...
These lists are in the case study spreadsheet, but putting them here for convenience.  The current 10-year Treasury note yield is ~2.2%.  Differences of a few tenths of a percent will be insignificant over a few years, so using a coin toss (or gut feel) when options are that close is fine.
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.
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.
8. Invest in 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

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3) Transportation.
I defer to others.

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4) Other. Whatever other suggestions you have would be very welcome. Maybe I don't even know what questions to ask...
Other posters have already highlighted the big opportunities.  Probably time for some feedback from the two of you: what do you think?  How much do you think can you change in the next, say, two months?  Willing to post again then (or even sooner) with progress?

Good luck!

1967mama

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Your potential to turn this around is awesome! Posting to follow!

Sibley

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Not repeating what everyone else said, but I didn't see one thing I thought of.

Regarding the SL - look into refinancing to a lower rate if you're not eligible for forgiveness, etc. If you can cut that rate it would really help. May not make sense, but doesn't hurt to investigate.

Above all, you've seen the problem, congrats. That's half the battle.

2ndTimer

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Came back to share some more because we are neighbors.  I don't know how long you have lived here but if it hasn't been too long, I want to encourage you to look into the recreational possibilities near here.  If you love or can learn to love hiking, biking and camping you are practically in cheap recreation heaven.  Our biggest problem is whether to go for a hike or a bike ride when we have a couple of free hours and when we have a free weekend the question of whether to go camping in the mountains or  at the beach is enough to give us half an hour of argument. 

Recently, when we were looking at a beautiful view, I had a wild craving for a cheese sandwich.  I am so used to picnicking in wonderful places that stimulating my eyes automatically turned on my stomach.

Leanthree

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The most important thing is to think of the satisfaction you now get from spending money, and to get that satisfaction from saving. It might not happen overnight, but take the spendy feelings you and spouse have (from being stressed at work, from impressing friends, from feeling the need for fancy dinners out) and therefore splurging on something useless, and get that satisfaction from looking at your bank account: first seeing your emergency fund grow, then your debt agressively paid down, and then your nest egg grow. To look at your student loan balance as $0 will be one of the best days of your life. Think about that future moment in the 20 minutes it takes you to make just as good of a meal as the local restaurant.

You will look back and think of all the small sacrifices you made that turned out to not be sacrifices at all because of the happiness you derived from each purchase avoided. That is the key. Everything with budgets and retirement savings and how much to spend on this or that category takes care of itself.

kittenwhiskers

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Hi everyone! Thank you so much for all the important questions and feedback. I have been thinking through answers.


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Wow, okay.  You paid off $39k in credit card debt?! This SL should be a breeze :)

Some low-hanging fruit:
-Christmas/Holidays: You spend $2.4k a year on holiday gifts? What do you buy? Who do you buy it for? Either reduce the # of people you are buying gifts for or reduce the amount of $ spent per person.  It's nice that you are generous, but you need to put on your own oxygen mask first.
Yes! I know we spend too much on gifts. This is the only place I saw to put any gifts, so I included everything here: flowers for coworkers on their birthdays, birthday and Christmas gifts for the family, etc. Also, #2 lives far from the rest of his family, and when he visits, he tries to help out with things that need fixing. Parts for stuff like that (plumbing washers, car parts, etc.) are all included here. I don't want to get in the way of that part, but for holidays, etc. I will need to start thinking about more cost-effective ways to show we care. :)
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-Clothing/Shoes: Again... what do you buy? Try shopping at thrift stores if you have to.  I've found some really nice items there.. for example, my main work blazer (still had tags) was $3 at Goodwill.
The past year we have had more clothing purchases than previous years because we started eating healthier and working out and have lost several clothing sizes. I think we have lost a combined total of about 80 lb... by purchasing more expensive foods like lots of fresh fruits and vegetables and quality meats, less processed foods, etc. Which also increased our food costs. :)
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-Financial Fees: What is this? ATM Withdrawal fees? Stop it! That's an easy peasy $46 extra a month that can go to savings/debt paydown.
Financial fees - I put the interest from credit cards here. We have already paid these off, so this should be a non-issue moving forward.
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-Landline: Get rid of this.  Yesterday.
I feel uncomfortable getting rid of the landline, because I want to still be able to call 911 or my family if for whatever reason the internet crashes.
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Besides that, I think food is your greatest enemy here.  You spent $1800 a month.  What the heck do you spent almost 2 grand on a month for food only? What are you buying? I would consider looking through the numerous grocery threads on the forum and reading through those - just do a search. 
You are right! We spend way too much on food. It is more expensive to eat fresh fruits, vegetables, meats etc. than processed foods, and I don't want to give up on this because we have been so successful with our weight loss. However, we do spend an excessive amount of money on all-brand-name products like fancy olive oils, real vanilla, and overpriced tiny little bags of nice stuff like roasted pumpkin seeds etc. Starting 9/1/15 we started seriously looking at generics and bulk foods to help reduce costs, and have started only buying brand name products if there is no generic available or if the brand name product is on sale and very close to the generic price.
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I like going out to eat, so I can kind of feel your pain.  How much would you save by going out to eat only 2x a month? What do you typically order?
Too much food, and at too fancy of places! Cutting back to only eating out twice a month should put us only about $100-150 a month for dining out. Still probably way too much for lots of slick mustachians here, but much better than our previous grand a month.
« Last Edit: September 02, 2015, 02:57:34 PM by kittenwhiskers »

humbleMouse

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-Landline: Get rid of this.  Yesterday.

~~ I feel uncomfortable getting rid of the landline, because I want to still be able to call 911 or my family if for whatever reason the internet crashes.


Just to clear things up here, if the internet goes down you can still call 911 or your family.  The internet is not what makes talking on cell phones possible. 

kittenwhiskers

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Thank you for the reply!

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Cable TV   $83 (recently reduced to $50): Can you drop this? Get SlingTV for $20? Netflix?
We recently switched from cable TV to a satellite provider. We get much less channels, but save about $50 a month with the new plan and the price is locked in for 2 years. Plus, we got a $200 gift card plus an extra $5 off per month for the first 10 months for switching, and free Netflix for a year. I would be perfectly happy with rabbit ears, but #2's mother sabotaged me by having cable installed without my knowledge or permission, and #2 is hooked.
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Computer (paper/software/etc.)$24 :  Almost $300 a year in paper and ink? What software are you purchasing?
This is everything computer-related. Paper, ink, parts that break, etc.
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Dining (Pizza, Restaurant, etc.)   $921 : This is what's killing you
I know!!!! I hear you and we have a plan to decrease to about $100-150/month.
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Fuel/Public Transport   $416 : Crazy high but I see someone has a truck ;)
Plus my current vehicle is a V6 and requires premium gas. Crazy!! But, I own it free and clear and it's not worth much since it has about 285,000 miles on it.
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Groceries   $929 : Ok, I gotta ask - what are you two eating?! $2k a month on food???
See above, lots of fresh fruit, vegetables, and quality meats. Plus pretty much only brand name everything. The brand name part we can change, and we're starting to pay close attention to availability of generics and bulk foods, and we're starting to only purchase meats that look great but are on sale. We'll see how we do!
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Miscellaneous   $450 : What gets dumped here?
Ah, yes. Well, I have a whole category that didn't seem to fit anywhere else, "personal care". Deodorant, toilet paper, etc. (non-food household stuff) all goes here. $249 of the $450 is this.
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Pets   $80 : How many pets? May be some ways to trim this down a bit ($50-$60?)
Two cats. We had a dog but he had a lot of health problems and we had to put him down. We have been postponing getting a dog until we get stuff paid off. I don't think we can cut this down any more, it's just food, litter, and vet bills.
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Phone (landline)   $35 : Get rid of this

Recycling/Trash   $141 : This seems really high to me.
This includes water, trash collection, sewer, etc. on one bill from the city.
« Last Edit: September 02, 2015, 02:51:48 PM by kittenwhiskers »

kittenwhiskers

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Travel/vacations $1071 per month!!!
This includes a really ridiculous vacation we took last year to Las Vegas. That will not be happening again!!
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This and Christmas really stood out. I think those amounts should be your annual not monthly budget while your hair is on fire.

Dining (pizza) $921

Dining out is also rediclous. It doesn't look like these are even quality meals. Buy frozen pizzas on sale and treat yourself to one nice dinner out per month. Max $80-100! Order something original that you can't make at home and eat it slow :).

Does #2 make at least $700 more than you per month? Since the truck is "not negotiable" I would many take it from their budget first. If they have fun money fine, but that payment would not fit in my family budget. (Unless it was for only 1 year :) )
We actually pool ALL our money into one big pot, so my budget is also his and vice versa! We tried having separate accounts for awhile but #2 is completely irresponsible and was constantly overdrafting until I took over.
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I hope you can make some changes ASAP.

Travel & dining out are an instant 2K per month or $24,000 per year. That is enough savings for you to "sponsor" an entire MMM family. ;)
« Last Edit: September 02, 2015, 03:01:23 PM by kittenwhiskers »

kittenwhiskers

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1. We live in a HCOL area (Chicago, so similar prices to Seattle) and we spend ~$750/month on groceries AND dining out for two people. Granted, that's much higher than most people on this forum, but shooting to cut your food bill in HALF would be a good start--and save you almost $1,000/month. Look at some of the other forums for good suggestions on meal-planning and grocery shopping. (This is a recent discussion that may be relevant: http://forum.mrmoneymustache.com/welcome-to-the-forum/i-need-help-from-fellow-frugal-healthy-eaters-groceries-are-killing-us!/msg788896/#msg788896)
Savings: $1,000/month
THANK YOU SO MUCH for the specific goal!! I have been going through the forums in detail but it is taking a really long time. There is lots of good information here!
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2. Unless you are starting a new job and need to build a professional wardrobe, I recommend joining the "No Clothes Shopping 2015" in the "Throw Down the Gauntlet" sub forum (http://forum.mrmoneymustache.com/throw-down-the-gauntlet/no-clothing-shopping-in-2015/msg783777/#msg783777). $225/month for clothes is a lot; this forum might is helpful not only for not buying clothes but getting to where that shopping impulse is coming from.
Savings: $200/month
Ha! If we did that, we would be naked. :) The reason we had so much clothing cost the past year is because we lost lots of weight and have lost several clothing sizes. I HATE HATE HATE clothes shopping, so I normally wear stuff until it starts falling apart, but had to get new stuff when my pants started falling off!
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3. What are these "Financial Fees" and why do you have them? Get rid of ATM charges, bank overdraft fees, annual fees on credit cards (unless you balance that out with point churning), or anything else to that effect.
Savings: $46/month
This is actually interest from credit cards that have been paid off, so a non-issue moving forward.
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4. Drop the landline and switch to lower-cost cell-phone plans. Republic Wireless has some great options with smart phones, if that's a necessity to you.
Savings: $125/month
I am currently looking into new cell phone plan to help reduce cost, but am trying to choose very carefully... I do use the data when shopping to check prices at other stores, so I don't want to go voice only.
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5. Figure out what you're spending $450 on in your Miscellaneous category. Reduce it to $100 as a start.
Savings: $350/month
I didn't see another place for personal care and random household stuff like deodorant, toilet paper, etc. so I put it here. This is about $249 of Miscellaneous.
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6. School/Tuition/Books - Is one of you in school? Or is this just how much you drop at B&N a month? Check out your local library--I've been getting ebooks free to my Kindle from them for about six months now, and it's awesome.
Savings: $75/month
I am in healthcare and have to have continuing education to keep my license and my job. :)
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Total saved with the above changes: $1,796

7. Work/Professional Fees - Can you say more about this? If it's not a monthly union due or the like, it might be worth re-assessing.
Required fees like professional license and vital professional memberships. Fortunately, my employer pays for over half of my membership costs.
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8. Student Loans. I feel ya, we're at 7.125% for about $50,000. If you can't refinance to a lower rate (check out SOFI, D&B Bank, etc.), then take the extra $1,000 you're saving from your food spending and throw it at the loans. The money you'll save in other areas can go to a savings/Emergency Fund buffer.
I have looked into refinancing and consolidating, but these are still directly with the government, and I do not want to lose the ability to defer or have it forgiven if something happens.
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Specific Questions
1. I'm less anti-tax refund as others on this forum, but we throw our entire refund to student loans. I highly suggest you do the same.
I hear you! Previously we were using it to pay off credit cards but those are gone now and I'd rather have the money every month.
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2. If you're not using YNAB, I suggest you invest in that $60 (which would be a little over half your Miscellaneous category for September, since you're cutting that, right?) Build up a buffer (this month's income pays next month's bills--YNAB Rule 4) and then siphon all extra income to debt. Given your job stability, you seem very safe with a 1-2 month emergency fund.
Thank you! I will look into this (even though it is another cost). :) We are currently using Mint.
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3. Buy a 5-year old used Prius or other safe, gas-efficient vehicle. Seattle should have a ton of older, efficient vehicles for sale (dense population, lots of commuting, socially-conscious left-leaning population... doesn't everyone there drive a Prius?) Safety is a relative term; as long as your car isn't trying to sabotage you, your safety is basically dependent on your driving and the driving of others around you.
Hahaha! Everyone in Seattle does not have a Prius, but there sure are a lot of them. For safety, my car has 285,000 miles and I'm not sure how long it will hold out. Re: Prius, I have seen people doing all kinds of crazy stupid things on the road to get to their destination 30 seconds sooner and have almost been hit several times. If somebody does hit me, I want to have a chance of living. Mid-size car is as small as I'm comfortable going, but I'll continue trying to convince myself to go smaller.
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Question: In a Income=X, Expenses=X, what is your net income and your monthly expenses? Do you have a surplus, or are you accounting for every penny below (or, horror of all horrors, are you spending more than you have coming in each month?) With mortgage, car payments, student loans, and other monthly expenses accounted for differently in your case study, I couldn't quite get what your income/expense was each month.
It varies depending on whether we have a large bill that month, e.g. expensive car repairs. However, on average, we've had about $3,000 surplus per month which we've put towards credit cards (which are now paid off), car repairs, etc. Thanks for your input!!
« Last Edit: September 02, 2015, 07:38:15 PM by kittenwhiskers »

kittenwhiskers

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Pay off your debt then build emergency and retirement funds.  If at any time employer matches contributions, then get the match.
Thanks for the input! I just realized when adjusting my withholding that we are putting like an extra $400 a month above the "Married" selection to avoid owing money at the end of the month... and that if I put 5% of my pay into deferred compensation it would only drop my own paycheck by less than $200 a month. Why pay the government when I can pay myself?
« Last Edit: September 02, 2015, 07:38:29 PM by kittenwhiskers »

kittenwhiskers

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+1 to the other suggestions.

The food costs are most concerning to me as they indicate an ongoing, daily struggle with excessive spending/ineffective planning.

Spending close to $2000/mo on dining/groceries is craziness- this is more than your mortgage and property tax! I second cutting this in half immediately. $1000/mo for food is an extremely generous budget and will allow you to eat out plenty and buy expensive cheeses and organics if you prefer. I suspect your grocery budget is so high due to ineffective meal planning as opposed to high food costs themselves. Plan meals for the week, shop with a list, stick to that list, and then don't go back to the store until the next week. This should be completely doable with a budget of $600 for the month.
Thank you for the specific goal! I addressed this in previous responses and we do plan to reduce costs by buying more stuff on sale, generics, bulk foods, etc. We'll see how September pans out!
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Dining out  - limit yourself to 1 restaurant/take out per week. Even if you blow $100 a week at said restaurants (you shouldn't fyi), you will still only be spending $400 instead of $900+. Again, extremely generous and unlikely to cause you to feel deprived in any way.
Thanks for the specific goal. Right now, we're aiming for only eating out twice a month. We'll see how that goes. But you're right, even if we get down to an excessive $400 that would still be about $600 a month saved. Current goal is closer to $150 though.
« Last Edit: September 02, 2015, 07:39:49 PM by kittenwhiskers »

kittenwhiskers

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Hi Kitten,

I hope you are starting to get excited at the savings you can make.
YES! You have all given very helpful feedback and I appreciate your time! :)
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I know one of your questions was where to prioritise?

Try this spread sheet:

http://www.vertex42.com/Calculators/debt-reduction-calculator.html

Plugging in your current payments things will eventually get paid off in 7.5, 15.5 and 3.4 years for your student loan, mtg and car respectively. And cost you $175K in interest payments.

Add $2000K per month to the payments and set it to avalanche (greatest interest first).

Now you can pay off in 3.4, 8.1 and 3.4 years respectively. Interest payments are now down to $86K. 

But you will be debt and mortgage free in 8 years.
Thank you so much for the specific suggestions!
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Now, show this plan to #2 & start getting more excited!!!

PS. There are other calculators on that site and I would find one of the savings ones and try to find another $1K to put into savings. With your large incomes this should be possible. Some would argue not to rush the mortgage and save more sooner.  Your call.
« Last Edit: September 02, 2015, 07:41:42 PM by kittenwhiskers »

kittenwhiskers

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I am also half of a couple who lives near Seattle and you are  paying WAY TOO MUCH for food.   Things I do that keep our food budget around $300/month for the two of us.

1.  Learn to cook whatever you are going out for.  In the past few years, I have mastered pizza, flat bread and hummus, Chinese Roast Pork, steamed dumplings, home made pasta, souvlaki and enchiladas.  Pick the thing you crave and learn to make it better than a restaurant.  It is very satisfying.   Don't try to do it all.  Pick one thing and beat it into submission.  Then when you find yourself craving something else do it again.
Great idea, thank you! We don't have a lot of time for fancy cooking but generally cook once for the workweek then we have a little more time on the weekends to try stuff like this.
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2.  Plan ahead.  We rarely leave our house without a snack or two packed somewhere.  If we are going together it is often a full scale picnic complete with thermos of home brewed coffee.  When I travel by myself I carry an individual rice crispy treat from Grocery Outlet.  I bought a stack of them when they were 6/$0.99.  That means each one costs 0.18.  Not much to keep me out of a restaurant.
Not a bad idea to just have something that won't go bad in the car at all times... we have cut out sugar but it would be great to keep nuts or something in the car.
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3.  Pack lunch every day.  Only an important lunch meeting should stand between you and a packed lunch.  It works well to do this before you go to bed.  That way there is no thinking in the morning when it is hard.
We do this already. #2 likes his coffee out and recently switched to only getting drip, which cut this portion down to less than half the cost of a latte.
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4.  Invest in a slow cooker if you don't have one.  Try the thrift store for this.  If you know you have Italian Pot Roast or chili to come home to you are much less likely to stop for food en route.
We have one and we do this already. Handy to have food cooking while we're at work.
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5.  If you haven't found Grocery Outlet yet, go and look.  I just came home  from there with another 10lb. of excellent cheese for which I paid roughly $2.00/lb.  Would have bought more but fridge is still full of cheese.
Thanks! We have one close to home and will check it out.
« Last Edit: September 02, 2015, 07:43:31 PM by kittenwhiskers »

kittenwhiskers

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Welcome! You've gotten a lot of great advice so far, especially on your dining, travel/holidays, and clothing categories. Those should all be cut drastically. Consider cutting cable too, but this is small potatoes compared to the $2K a month on dining.
You are right, great responses and advice.
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To your prioritization question, your student loans are at a much higher interest rate than your truck loan. Unless you're paying off the truck loan in order to sell (which would be great, but sounds like a no-go with your SO), I would focus on the student loans before the truck loan. Emergency funds are a bit of personal decision. You have $89K in credit card space. That could partially work as an emergency fund IF you could pay off the balance quickly. This should be feasible with your large incomes IF you control your spending. You can also withdraw contributions from your Roths penalty free in case of emergency (before paying yourself back, of course). I'd build up an emergency fund of a couple months of living expenses (reduced living expenses) and then throw everything at the student loans.
You have a good point about the credit cards as a potential emergency fund. Current goal is 3 months of living expenses. #2 was thinking it might be good to just let the cash keep building up then when we have enough just pay off the student loan completely in one big payment. Of course, we would still be accruing interest during that time, but he is more comfortable having more cash on hand in case something happens. What do you think?
« Last Edit: September 02, 2015, 07:44:43 PM by kittenwhiskers »

kittenwhiskers

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Thank you for the input! I have addressed most of this in other responses, but thank you in particular for the suggestions about alternative cell phone carriers. Cellular data to some degree is a must, because I actively use internet for price/sale comparisons while in the store. But we probably don't need a whole lot of data to accomplish this.

Welcome!  I love the slow-cooker idea, but suggest either a rice cooker to do both rice cooking & slow cooking, or a CostCo pressure cooker to do slow-cooking FAST. 

More places to save...
Internet $50 - not bad for Seattle!
Cable - cut the cord, sign up for NetFlix, or record over the air using a Windows 7 laptop and Windows Media Center.
Phone (landline) $35 - drop, or convert one of your cell phones to use the home number (one-time $15 cost).
Phone (cell) $139 - switch to Ting, Republic Wireless, or Airvoice.  You can either bring your phones with, or sell them & buy new devices. Either way, you can get this down to $60/month and still be 'unlimited'. Try cutting back to a lower data plan, and going prepaid.  I'm on the $20/month Airvoice plan ($10/month for 2 phones).  I use mostly wifi at home and at work, and infrequently turn on cellular data for use in-the-car. And if I need more... whatever... for the month, I pre-pay an additional 10 bucks. 

REALLY save by weaning yourself from high-speed cellular data - experiment for a month by turning off wireless data, and see how many times you find yourself wanting to turn it on.  When that happens, decide if you can wait until you get home, or go to a Starbucks/Panera/Library.  If you absolutely can't wait, turn on cellular data, do whatever it is, then switch it back OFF.

In any case... welcome to the neighborhood!  There's frequently pie, and/or beers, so sign up for the meetups.

kittenwhiskers

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Before even thinking of going on vacation, you two should really get rid of your debts asap. You guys make too much money to be poor. Vacation should be off your list for now, go somewhere near that won't cost you an arm & a leg if you really want to go on vacation. Samething for your dining and groceries, I mean 929$ for dining, that is total insanity!!!! Like everyone else said, dump your landline phone...I won't go any further than this because I think the other forum members have given you good ideas here. The bad news is that you have shit loads of debt, the good news is that you make a shit load of money and I have hope for you, you can eliminate all this debt, it will take a few years, but if I were in your shoes, I would cut 90%+ of all unecessary expense. Now I don't know if your Spouse is with you in this, but if you are able to cut all those unecessary expenses, you should be able to pay it all off in 2 to 4 years max.
Yes and no, he is also uncomfortable with the degree of debt, but he comes from a family that used to use food stamps, so he is also very sensitive to cutting back on things too much.
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One thing I have noticed is that you have a very long list of expense, you should cut your expenses enough that you have a very short list. There are too many hands going into your wallet.
I used the template provided on the sticky. :)
« Last Edit: September 02, 2015, 07:45:40 PM by kittenwhiskers »

kittenwhiskers

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Nice editing on the OP.  Much more understandable, as one might guess from the very good suggestions already made.  To your specific questions:
1) Taxes. Normally we keep our W4's set to "Married but withhold at the higher single rate" so we get a windfall at tax time, but this year I have been re-adjusting every 3 months or so using the IRS calculator to try to minimize any tax refund or bill.
At your income, if you can get within a few hundred dollars refund or to pay when you file Form 1040, call that "good enough."  As I think you know, a large refund is definitely not a "windfall" - it a a return of a 0% loan you made the IRS when you have the SL lenders charging you 6.55%.
Thank you so much for the detailed information. I was just recently adjusting our W-4's and realized we are filing as Married plus putting a combined total of over $400 a month toward more taxes. One calculator I tried said that if I only put 5% of my own salary into deferred compensation that would reduce my paycheck by less than $200. Which makes me wonder why we are paying the government when we could pay ourselves instead and still come out about the same tax bill... still looking into this for verification and to determine exact amount to stash.
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Would it be better to continue as we are, increasing/decreasing income tax withholding, or to boost deferred compensation contributions?
Either more deferred comp or faster payment of the 6.55% loans - it's a close call.  See "Whats and Whys" below.
How much would that affect our take-home pay? We haven't been able to deduct student loan interest due to income.[/quote]The spreadsheet where you got the expense categories should give you a good estimate of how things will affect take-home pay.  Note that it calculates your annual tax liability and assumes your withholding amount matches it.  Also note that if the two of you can put an extra $36K/yr into 401k (or similar) plans, you will be able to deduct ~$550 in SL interest (if I transcribed the OP numbers correctly).
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2) Priorities. I know we have a dismal amount of savings and this is stressing us out. We are thinking maybe a goal of about $27,000 emergency savings then start paying off student loan, then car loan? What do you think? How much emergency savings would you recommend, and should we start with this or delve right into student loans? I figure the car loan is a very low interest rate and should probably be paid off after the student loan. However, it would be nice to have that extra $707 a month to put toward student loan payments...
These lists are in the case study spreadsheet, but putting them here for convenience.  The current 10-year Treasury note yield is ~2.2%.  Differences of a few tenths of a percent will be insignificant over a few years, so using a coin toss (or gut feel) when options are that close is fine.[/quote]Thank you! There is a lot of good information in the spreadsheet, and I am still figuring it out.
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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.
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.
8. Invest in 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
Thank you so much for the specific list! There is no company match for either of us.

I remember seeing something about a backdoor Roth on here. I'll take a look at it... Also, thank you so much for the information re: whether to fund Roth or traditional IRA! I haven't seen that before and will look at it very carefully.
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3) Transportation.
I defer to others.

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4) Other. Whatever other suggestions you have would be very welcome. Maybe I don't even know what questions to ask...
Other posters have already highlighted the big opportunities.  Probably time for some feedback from the two of you: what do you think?  How much do you think can you change in the next, say, two months?  Willing to post again then (or even sooner) with progress?
Thanks so much for all your good feedback and input!! It will take some time but I am working to address all these things and plan to post back end of September with progress.
« Last Edit: September 02, 2015, 07:48:40 PM by kittenwhiskers »

kittenwhiskers

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Not repeating what everyone else said, but I didn't see one thing I thought of.

Regarding the SL - look into refinancing to a lower rate if you're not eligible for forgiveness, etc. If you can cut that rate it would really help. May not make sense, but doesn't hurt to investigate.

Above all, you've seen the problem, congrats. That's half the battle.
The first step to fixing a problem is admitting you have one! LOL! :)
« Last Edit: September 02, 2015, 07:49:20 PM by kittenwhiskers »

kittenwhiskers

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Came back to share some more because we are neighbors.  I don't know how long you have lived here but if it hasn't been too long, I want to encourage you to look into the recreational possibilities near here.  If you love or can learn to love hiking, biking and camping you are practically in cheap recreation heaven.  Our biggest problem is whether to go for a hike or a bike ride when we have a couple of free hours and when we have a free weekend the question of whether to go camping in the mountains or  at the beach is enough to give us half an hour of argument. 

Recently, when we were looking at a beautiful view, I had a wild craving for a cheese sandwich.  I am so used to picnicking in wonderful places that stimulating my eyes automatically turned on my stomach.

Thank you! We have been here for about 20 years so are familiar with all the recreational activities. We used to do a lot more one-day road trips when we were first starting out. Maybe time to get back to that!

kittenwhiskers

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Ugh. Apparently I don't know how to format responses to previous posts in forums. How do you quote just a portion then put your comments beneath? I will fix my responses when I know how... :)

EDIT: Figured it out! Start with bracket quote end-bracket and end with bracket /quote end-bracket... hopefully responses above are a little more readable now... Thanks again for all your help!
« Last Edit: September 02, 2015, 07:51:38 PM by kittenwhiskers »

rubybeth

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Ugh. Apparently I don't know how to format responses to previous posts in forums. How do you quote just a portion then put your comments beneath? I will fix my responses when I know how... :)

Just leave your comments OUTSIDE of the area where it says "quote author" and the end of the "quote" section. :)

N

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Im almost 42 years old.
We had a fire in our house when I was about 9 and that was probably the only time anyone in my family ever called 911. Even then, its possible we evacuated the house and called from a neighbors house. But anyway,

Why are you happy spending 420/year on such a rare scenario? Keep your cell phones charged.
If you are concerned about a power outage, you could also get an Uninterruptible Power Supply which you buy one time instead of keep paying for, like landlines.

Read here: http://www.techmeshugana.com/2013/04/voip-and-the-return-of-the-home-phone/

I use airvoice wireless. I have the ability to turn on the data and use that, but it turns out to be pretty rare. Im able to get by on the 10/mo plan. In fact, I almost always have leftover that rolls over. My husband uses his cell phone even less, and averages to be about 6$/mo. Then we have voip.ms for our  home phone. If I have to make calls, I generally use that. Over the last two years, our phone averages to be about 25/mo.

Alot of stores that Im in when I want to price check have free wifi. Also, I have comcast infinity for internet and they have wifi hot spots that I can often use when Im out.

wrt to the household supplies category. There are 2 adults and 2 kids in my household and our household supplies average out to 100/mo.  question every single expense in that category. Surely you can wring some more savings there.

good luck! with your high incomes, once you get your spending under control, you will be doing great.

Malaysia41

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Pay off your debt then build emergency and retirement funds.  If at any time employer matches contributions, then get the match.
Thanks for the input! I just realized when adjusting my withholding that we are putting like an extra $400 a month above the "Married" selection to avoid owing money at the end of the month... and that if I put 5% of my pay into deferred compensation it would only drop my own paycheck by less than $200 a month. Why pay the government when I can pay myself?

Just to be clear - $1800 in savings account is a lot when you have SL debt as well as a solid line of credit on ccs.  Throw EVERY SAVED PENNY at your debt.  In fact, I'd throw $800 of that savings account at my debt if I were you. Live frugally, save, kill the debt.  If an emergency happens, skip paying the debt for a month or two.  Then resume. Carry on.

kittenwhiskers

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Thank you for all the replies!

Interesting, I was looking through some old paperwork and found an old budget from 1998. At the time, we had an apartment, 2 cats, one car paid off, and one car we were still making payments on at $304/month, 0.9% interest (I don't remember if it was 3 or 4 year loan). Updated original chart with that data.
« Last Edit: September 12, 2015, 08:37:34 AM by kittenwhiskers »

mohawkbrah

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i could retire within 2-3 years if i had your salary...

:(

Malaysia41

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Ack that chart!

Kill the n/a  n/a lines. Good Lord, people come here to help, not machete through a forest of irrelevant information.   No, we don't want to rifle through your shoe box overflowing with receipts.

Try again?  More concise?  Also, if you don't know how to format, figure it out.  The data splayed across the screen is difficult to digest.  Ack again - the columns don't even line up. You probably have some setting that makes colspan=100%.  You've got to kill that.

Admittedly, this may be a harsh post. But I have a feeling that with the amount of work you are demanding of your readers, you're going to get crickets chirping.  We all have day jobs.  Well, some do, anyway.

/ tough love.

ShoulderThingThatGoesUp

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Healthy food shouldn't be more expensive. Buy big store-brand bags of frozen vegetables, not hand-washed bagged stuff, etc.


Malaysia41

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mm1970

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I am also half of a couple who lives near Seattle and you are  paying WAY TOO MUCH for food.   Things I do that keep our food budget around $300/month for the two of us.

1.  Learn to cook whatever you are going out for.  In the past few years, I have mastered pizza, flat bread and hummus, Chinese Roast Pork, steamed dumplings, home made pasta, souvlaki and enchiladas.  Pick the thing you crave and learn to make it better than a restaurant.  It is very satisfying.   Don't try to do it all.  Pick one thing and beat it into submission.  Then when you find yourself craving something else do it again.

2.  Plan ahead.  We rarely leave our house without a snack or two packed somewhere.  If we are going together it is often a full scale picnic complete with thermos of home brewed coffee.  When I travel by myself I carry an individual rice crispy treat from Grocery Outlet.  I bought a stack of them when they were 6/$0.99.  That means each one costs 0.18.  Not much to keep me out of a restaurant.

3.  Pack lunch every day.  Only an important lunch meeting should stand between you and a packed lunch.  It works well to do this before you go to bed.  That way there is no thinking in the morning when it is hard.

4.  Invest in a slow cooker if you don't have one.  Try the thrift store for this.  If you know you have Italian Pot Roast or chili to come home to you are much less likely to stop for food en route.

5.  If you haven't found Grocery Outlet yet, go and look.  I just came home  from there with another 10lb. of excellent cheese for which I paid roughly $2.00/lb.  Would have bought more but fridge is still full of cheese.
These are super good tips.  Our killers are when we are out and kids are hungry.  I say "no" and spouse says "yes" and it frustrates the crap out of me.  But who needs a freaking snack when you had lunch 30 minutes ago??

Malaysia41

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I am also half of a couple who lives near Seattle and you are  paying WAY TOO MUCH for food.   Things I do that keep our food budget around $300/month for the two of us.

1.  Learn to cook whatever you are going out for.  In the past few years, I have mastered pizza, flat bread and hummus, Chinese Roast Pork, steamed dumplings, home made pasta, souvlaki and enchiladas.  Pick the thing you crave and learn to make it better than a restaurant.  It is very satisfying.   Don't try to do it all.  Pick one thing and beat it into submission.  Then when you find yourself craving something else do it again.

2.  Plan ahead.  We rarely leave our house without a snack or two packed somewhere.  If we are going together it is often a full scale picnic complete with thermos of home brewed coffee.  When I travel by myself I carry an individual rice crispy treat from Grocery Outlet.  I bought a stack of them when they were 6/$0.99.  That means each one costs 0.18.  Not much to keep me out of a restaurant.

3.  Pack lunch every day.  Only an important lunch meeting should stand between you and a packed lunch.  It works well to do this before you go to bed.  That way there is no thinking in the morning when it is hard.

4.  Invest in a slow cooker if you don't have one.  Try the thrift store for this.  If you know you have Italian Pot Roast or chili to come home to you are much less likely to stop for food en route.

5.  If you haven't found Grocery Outlet yet, go and look.  I just came home  from there with another 10lb. of excellent cheese for which I paid roughly $2.00/lb.  Would have bought more but fridge is still full of cheese.
These are super good tips.  Our killers are when we are out and kids are hungry.  I say "no" and spouse says "yes" and it frustrates the crap out of me.  But who needs a freaking snack when you had lunch 30 minutes ago??

Yeah - I read each of these and thought, "I should be doing this... I should be doing this."  Especially the slow cooker.  I need to get that. (But I always always pack water and snacks when we go out. The last thing I want to do is be held hostage by some high priced coffee shop  because somebody's hungry.)