Author Topic: Case Study: One-Year Checkup on NYC Mustache-Lite Couple  (Read 4564 times)

dfree86

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Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« on: August 11, 2015, 04:08:39 PM »
Hi All,

I posted on here about a year ago when I was new to Mustiachianism. I wanted to post a few details about what we've been up to and how it's going. Thanks in advance for your input, friends!

For backstory: my wife and I have been together 10 years and married for one. We're 29 years old with no kids. We both have MA's and jobs we like. We live in NYC and have the great fortune of not having to pay rent, by virtue of living in a nice 2-bedroom apartment that is owner by her family. We're fortunate, we're happy and we're

Current Financial Vitals:

Combined gross annual salary: Approx. $150k

Emergency Fund: $14k in a local Federal Credit Union that we basically pay no attention to growing at 1.1% APY.

Savings Rate: 30% (approx 12% to max my 401k and the rest to a conservative 70/30 Vanguard "house" fund that we may use to purchase a house, but really is just a glorified Savings account where we put the bulk of our Savings.)

Credit Union 'Emergency Fund'in FCU : $14k
Vanguard "savings" conservative 70/30 account: $77k
Combined 401ks: $61k

Total current savings: approx: $152,000

Perks: No debt for either of us; we don't pay rent; solid 401k matching from my job (they contribute 10% base salary as long as I contribute 5%). My wife's company matches up to 4% and we use that too, though she's not maxing her 401k at the moment.

Expenses: Mostly all "luxuries", though our only big monthly bill outside of utilities is cell phones. No cable. We eat and drink out a fair bit living in NYC, but we've agreed that these and travel are things we value spending our money on. We also just finished a big reno/re-design to our apartment, so that some expenses have gone to that in the last year as well.

Here are a few things I wanted to check on and would appreciate advice about:

1) Our average joint monthly income, after 401k contributions is about $8000. Currently, we put $2000 of it toward the Vanguard savings, which is obviously 25%. I would like to up that to at least $3,000 in addition to the maxing of my 401k. (See question 4 below)

2) Our Financial Advisor suggested the Vanguard fund for Savings because we'll probably be using that money toward a house/apt purchase within the next five years. That said, this is kind of a nebulous goal since we're currently living rent-free in a 2-bedroom apartment that we love and recently re-designed. Does this mean the "House" fund should actually be less conservative and have more equity?

3) Kids are certainly on the horizon, but not for another year at least. How should this timetable influence our saving?

4) My wife's a bit of a shopper and the way we've got that accounted for that is she has a personal checking account of money she can spend on whatever she wants. However, our paychecks go into our joint account and her personal checking account (mine as well) gets a disbursement of $500 a month. In other words, they vast majority of our money stays in joint account, and we control through timed transfers just how much money is in our "fun money" personal checking accounts.

That said, my wife just got a 20% raise (included in all the above figures) and the question now is whether we increase the "fun money" disbursement to her account or increase our Savings rate. Even though we pool all our money, because it's her raise and she worked so hard for it, I feel inclined to at least talk over what to do with it (as we do everything).

5) And finally, given our circumstances, how do you think we're doing overall - as 29-year-old, NYC residents- in terms of our savings and future planning? Obviously we are not hyper frugal and we've applied a kind of adapted version of Mustachianism that suits our lives at the moment. I've been listening to a lot of the "So Money" podcast with Farnoosh Torabi and hearing about people who started saving and using compound interest young. Do you think we're on a good track for our future lives? A great one? Or should we definitely be doing more?

Many thanks to all the Mustachios out there!


wordnerd

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #1 on: August 11, 2015, 04:20:28 PM »
Re: kids. The biggest financial planning here will be paying for childcare (or one of you quitting your jobs), which in NYC could easily eat up $20k a year or more--almost half of your yearly savings (based on 30% of $152k). If you will also need to move out of your current rent-free apartment with a kid, you'll definitely need to reassess your financial picture. The good news is that it seems like there should be a lot of room to cut in your budget, since you're spending over 6 figures without paying rent.

In the immediate term, I direct any additional savings to max your wife's 401k. If you're interested in saving more, posting a case study might be helpful. You're doing fine, but I would hazard a guess that you could do a lot better 30%, since you aren't paying rent or a mortgage. Best of luck!

Mother Fussbudget

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #2 on: August 11, 2015, 05:02:24 PM »
WOW!  That's GREAT PROGRESS in just over a year, Dave!  Well done!!!

You've paid off $31,000 in student loans & other debt - AND saved an additional $39,000.
If your expenses are close to what they were a year ago ($2,600) then your FI target is probably around $780,000.
At your current rate, you'll be at your goal in 9-to-10 years. 

You tell US... how do *YOU* think you're doing?  ;-)

plainjane

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #3 on: August 11, 2015, 05:22:29 PM »
my wife just got a 20% raise (included in all the above figures) and the question now is whether we increase the "fun money" disbursement to her account or increase our Savings rate. Even though we pool all our money, because it's her raise and she worked so hard for it, I feel inclined to at least talk over what to do with it (as we do everything).

Rather than doing just one or the other, I'd suggest a one time "bonus" of celebration cash, and then it going to improve the savings rate.  Of course she needs to be on board.  What we've done in the past is one pay worth of the difference between the lower and higher salary.  We need to see that first paycheck anyways to be sure how much is in pocket.

thedayisbrave

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #4 on: August 11, 2015, 05:49:01 PM »
Real estate prices in NYC are, as I'm sure you know, insane.  Are you looking to buy in Manhattan or further away? How much is the average price for what you'd be looking for?

Sounds like you have a pretty sweet set-up.. why are you considering buying after you've only just upgraded your apartment?

I would definitely max out both 401ks if possible.

Re: raise money.  Definitely talk with her, but obviously the smart choice would not be to allocate all of that to 'fun' money.  See if a save 80%/spend 20% allocation would work.  Or 50/50 at worst.  But ultimately you're trying to avoid lifestyle inflation here... not encourage it. 

forummm

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #5 on: August 11, 2015, 07:32:30 PM »
Given that you are living rent free, you should be able to up your savings considerably (we have a similar income, pay $1700/mo in housing, and save a higher percentage). Also, with the tax bracket you are in, I strongly encourage maxing your 401ks and IRAs.

Yeah. If you had an NYC housing expense, it would eat up about 100% of what you're saving. So if you didn't have that gift, you'd be saving about 0%. It's great that you have that gift. But if you really want to be mustachian-lite, you have a long way to go. You're blowing most of that $100k that you're not saving. I guess it's great you're not also blowing the $50k in free rent you're getting.

dfree86

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #6 on: August 12, 2015, 09:05:49 AM »
Given that you are living rent free, you should be able to up your savings considerably (we have a similar income, pay $1700/mo in housing, and save a higher percentage). Also, with the tax bracket you are in, I strongly encourage maxing your 401ks and IRAs.

Yeah. If you had an NYC housing expense, it would eat up about 100% of what you're saving. So if you didn't have that gift, you'd be saving about 0%. It's great that you have that gift. But if you really want to be mustachian-lite, you have a long way to go. You're blowing most of that $100k that you're not saving. I guess it's great you're not also blowing the $50k in free rent you're getting.

I should point out our lifestyle is pretty spendy too. We spend a lot on dining out and clothing, compared to everyone else on this forum.

Thanks for the support here. I talked to my wife and she wants to put the raise into Savings, so that's good. We certainly are spending a fair bit here in NYC, but I'll feel good if we can comfortably accomplish the below plan. Then, maybe in a couple months, we tweak the savings up a little more.

We're going to try, starting in September, to get 50% ($4000) of our $8000 monthly take home into Savings. That's approx. $1200/month in my maxed 401k. And the other $2800/month to our short-term conservative Vanguard "savings" fund. The other option is to take some of the $2800 to use in maxing out my wife's 401K too. The funds available to her aren't great but it is tax-free of course. I don't know a lot about tax brackets (I should read up). The Mustachian view is to use the 401k $ as age 60-90 money, right? How do we know when we should switch from pumping up those 401ks to more short-term savings?

And lastly, any views on the emergency fund? It seems like having $10k or so in a liquid savings account (1.1% APY) that we can pull out any time we need to.

wordnerd

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Re: Case Study: One-Year Checkup on NYC Mustache-Lite Couple
« Reply #7 on: August 12, 2015, 11:23:38 AM »
Given that you are living rent free, you should be able to up your savings considerably (we have a similar income, pay $1700/mo in housing, and save a higher percentage). Also, with the tax bracket you are in, I strongly encourage maxing your 401ks and IRAs.

Yeah. If you had an NYC housing expense, it would eat up about 100% of what you're saving. So if you didn't have that gift, you'd be saving about 0%. It's great that you have that gift. But if you really want to be mustachian-lite, you have a long way to go. You're blowing most of that $100k that you're not saving. I guess it's great you're not also blowing the $50k in free rent you're getting.

I should point out our lifestyle is pretty spendy too. We spend a lot on dining out and clothing, compared to everyone else on this forum.

Thanks for the support here. I talked to my wife and she wants to put the raise into Savings, so that's good. We certainly are spending a fair bit here in NYC, but I'll feel good if we can comfortably accomplish the below plan. Then, maybe in a couple months, we tweak the savings up a little more.

We're going to try, starting in September, to get 50% ($4000) of our $8000 monthly take home into Savings. That's approx. $1200/month in my maxed 401k. And the other $2800/month to our short-term conservative Vanguard "savings" fund. The other option is to take some of the $2800 to use in maxing out my wife's 401K too. The funds available to her aren't great but it is tax-free of course. I don't know a lot about tax brackets (I should read up). The Mustachian view is to use the 401k $ as age 60-90 money, right? How do we know when we should switch from pumping up those 401ks to more short-term savings?

And lastly, any views on the emergency fund? It seems like having $10k or so in a liquid savings account (1.1% APY) that we can pull out any time we need to.

This is the reference thread on withdrawing 401k money before 59.5: http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/