Author Topic: Case study - Please help me make a plan for our future!  (Read 4159 times)

Student loan stomper

  • 5 O'Clock Shadow
  • *
  • Posts: 34
  • Location: Texas
Case study - Please help me make a plan for our future!
« on: September 05, 2015, 09:04:47 PM »
Hello all! 

I am pretty new to the MMM community but I am so excited to find people who care more about their freedom than about their clothes, hair, and cars!

I filled out the info spread sheet and it can be found here: https://docs.google.com/spreadsheets/d/1AMv-suKnKvteNCgdC0-SLEIiy2SC3yrGWIev9pPTzrs/edit?usp=sharing

One thing I didn't know how to do with the spread sheet was enter that both of us pay into state pensions me TRS and him the municipal equivalent, but the amounts were basically the same as what the sheet figured for SS so I just left that.  Other than that we have no retirement savings because we have been trying to Smash our debt.

My DH (25) and I (27) just got married in June, we live in Texas and will be married filing jointly this year.  We have no pets or dependents, but do drive frequently to visit relatives as almost none of our families live in the same city we do (too bad TX is so big...).  I have about a 30 minute commute, DH has about 15 minutes but he has to use his car for work. 

Assets: = $21,550
$11,000 in HSA (currently non-investment but I need to fix that suggestions welcome!) (I am the only one on an HDHP as DH has fully covered HP at work)
$5,050 savings for SL that should be forgiven at the end of the month but in case something goes awry with the forgiveness I want to be ready to pay it off( will go to DH's SL if not needed for mine). 

$1,000 savings for car repairs
$4,000 savings for emergencies
$500 in savings for upcoming family outings/events

Liabilities:
$20K in student loans (5K hopefully to be forgiven this month)
$2,304 to the orthodontist (no interest could have saved a bit if I had paid cash, but wasn’t sure if I was going to be able to stay in the area for 3 years so it seemed less risky to pay it out using the 30 month payment plan.)
2010 Honda Civic (paid for) with 71K miles on it,
2014 Jeep Patriot 11K miles (gift from DH parents will become DH’s upon Student loan annihilation)

Specific Question(s):
We want to start a family in the not too distant future (my side has a history of menopause at 35!), how do we balance that with the RE goal?  I am the main bread winner and I know we could live off of DH income even at his current job (if we had no student loans), but I worry about the implications of maternity leave and child care for our goal of RE.  I think ideally we would be at a point where DH could stay home with the kids or work part time, even if I had to work, but there is that tricky amount of time when they are babies… how do you manage through that (we won’t have any family nearby to watch them) without killing your RE dreams?  Our other thought is that he should try and find a better job for a bit and then it wouldn’t be as big of a deal for me to take time off during the early kid years, then switch for a bit and then meet our goal of RE.  But there seem to be a lot of “if’s”.

We would both like to find different jobs in the near future (I am pretty sure I want this to be my last year teaching, thinking of going into something techy trying to gain skills this year to make that happen) and DH is potentially looking to be paid more for his IT work.

We rent now, do we buy a house soon? How does saving for that look with saving for FI How do you choose a house and new jobs?  Do you decide where you want to live and then find jobs and move there or do you find the jobs first and move close to them?  Who finds the first new job?  After the first job is found do you move close to there and decide on a radius for the other person to look for a job? 
How do we balance saving in IRA type accounts with plain Index funds?
Do you think RE in 5-7 years is possible for us? I feel like we can, by February we are hoping to have killed the student loans which will mean we have paid off close to 100K in student loan/car loan and also cash flowed an 11K wedding and about $2,500 in gifts/help to my family who were having money troubles, and created our assets listed above.  In 5.5 years and that was with me only making 37K the first three, then I went to 51K and we have added DH’s income since last April.

I am excited and also scared to make this work; I need some encouragement because so many people are critical of our lack of spending habit, and I really want to make good choices so that we can have the life we want, rather than the life others think we should have.

Thanks!!





angelagrace

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Re: Case study - Please help me make a plan for our future!
« Reply #1 on: September 05, 2015, 10:28:51 PM »
I just had our first child in May and I am the "main bread winner" right now too. Hubby's income has carried us through my awesome 18 weeks unpaid leave. I go back in a couple of weeks.

I say all of that because with our sweet daughter has come some new perspective. I am all for early retirement, but I love our daughter so, so much more. I just wanted to throw in my 2 cents that having kids is so worth it, and I would give anything for my daughter. You are doing great, and I personally don't think you should worry too much about how kids will affect things. It will affect things a lot more if you wait too long and have to get IVF haha! Not saying to rush into it, but yeah :). You can have and raise kids in a mustachian way without spending a fortune on them. We did a natural home birth with midwives and it was awesome, cost $2500 total (from my HSA), and basically all of her clothes and "stuff" was given to us as gifts.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10624
Re: Case study - Please help me make a plan for our future!
« Reply #2 on: September 05, 2015, 10:46:04 PM »
I filled out the info spread sheet and it can be found here: https://docs.google.com/spreadsheets/d/1AMv-suKnKvteNCgdC0-SLEIiy2SC3yrGWIev9pPTzrs/edit?usp=sharing
Did you intend to leave the state tax at 9%?

Quote
One thing I didn't know how to do with the spread sheet was enter that both of us pay into state pensions me TRS and him the municipal equivalent, but the amounts were basically the same as what the sheet figured for SS so I just left that.
Good idea.  If they were significantly different from SS (and you pay nothing for SS) you could change the formula in the monthly SS cell.

Quote
Specific Question(s):
We want to start a family in the not too distant future (my side has a history of menopause at 35!), how do we balance that with the RE goal? … how do you manage through that (we won’t have any family nearby to watch them) without killing your RE dreams?  We rent now, do we buy a house soon? How does saving for that look with saving for FI How do you choose a house and new jobs?  Do you decide where you want to live and then find jobs and move there or do you find the jobs first and move close to them?  Who finds the first new job?  After the first job is found do you move close to there and decide on a radius for the other person to look for a job?
All that is really up to you - unfortunately there is no magic answer.  By being realistic and planning well, however, you are likely to do much better than pretending there is no problem.  You are doing a good thing by looking to understand your situation and what you can do.

Quote
How do we balance saving in IRA type accounts with plain Index funds?
For RE purposes, tax-advantaged accounts will be better than taxable.

Quote
Do you think RE in 5-7 years is possible for us?
Unfortunately the google docs version of the spreadsheet does not support data tables and thus the "Time to FI" chart also doesn't work.  In Excel, the result for your input is this:


That doesn't mean RE in 5-7 years is impossible, but it does mean that it won't happen with the numbers you have entered.  You can do various "what if?" tests in the spreadsheet (or in more complex estimators such as www.cfiresim.com, www.i-orp.com, etc.

Ok, just noticed that you had entered only 1 exemption.  With 2 exemptions and 0% state tax, things look much better.  Not down to RE in 5 years, but better.  Don't know if the rest of the entries are correct - you might check.  Any questions, just ask.  Good luck!

Student loan stomper

  • 5 O'Clock Shadow
  • *
  • Posts: 34
  • Location: Texas
Re: Case study - Please help me make a plan for our future!
« Reply #3 on: September 06, 2015, 05:53:53 AM »
angelagrace!  Thanks for the encouragement!  Both DH and I came form families where one parent worked so much they just weren't there a lot, and we don't want to end up like that, so that is our main concern.  I am glad to hear from someone who hasn't gone baby stuff crazy!  About 5 of my friends have just had babies and I am so overwhelmed when I go over and see all the stuff!  I have one friend who is raising her kids the Mustashian way, but I thought mostly out of necessity.  After finding MMM I realize that it could be done purposefully as well.  After we are done with student loans in February (or hopefully December!!) I will feel much better about starting on the baby journey. 

MDM!  Thanks so much for the help!  You are correct neither of us pay into SS.  I fixed the state tax and the number of exemptions and it added about $260 a month(thanks for the advice!).  Which makes since as some months we pay $3,000+ on student loans. Our plan is to take the whole $2,700-$3K a month and start either investing or saving for a house (or both?) after we pay off the student loans in December or February.  If we are planning to change jobs this up coming summer, I guess it might make sense to split the difference and save half for a down payment and invest the other half as it will probably be another almost 2 years before house buying is really an option?  What do you think?

I feel like my DH will be able to make more at his next job (right now he's making like $35K doing IT (network admin, etc...) for a local city), but in the grand scheme of IT jobs I feel like that is low.   So hopefully that will help with the have kids/buy a house/RE process.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10624
Re: Case study - Please help me make a plan for our future!
« Reply #4 on: September 06, 2015, 04:48:58 PM »
Our plan is to take the whole $2,700-$3K a month and start either investing or saving for a house (or both?) after we pay off the student loans in December or February.  If we are planning to change jobs this up coming summer, I guess it might make sense to split the difference and save half for a down payment and invest the other half as it will probably be another almost 2 years before house buying is really an option?  What do you think?
I think many different approaches are defensible.  What I might do - and if you asked me next week it might be different ;) - is to put the maximum into retirement accounts until your combined income takes you beyond the tax-advantaged limits.  Then (if you still desire), put any more income into you down payment fund. 
Again, no "right" answer other than your actions ought to reflect your priorities.  Good luck!

angelagrace

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Re: Case study - Please help me make a plan for our future!
« Reply #5 on: September 06, 2015, 05:03:34 PM »
angelagrace!  Thanks for the encouragement!  Both DH and I came form families where one parent worked so much they just weren't there a lot, and we don't want to end up like that, so that is our main concern.  I am glad to hear from someone who hasn't gone baby stuff crazy!  About 5 of my friends have just had babies and I am so overwhelmed when I go over and see all the stuff!  I have one friend who is raising her kids the Mustashian way, but I thought mostly out of necessity.  After finding MMM I realize that it could be done purposefully as well.  After we are done with student loans in February (or hopefully December!!) I will feel much better about starting on the baby journey. 

Yeah our culture has gone crazy with what is "needed" for a baby. I do highly recommend a video monitor--worth it :) but much of the gadgets are silly. And babies don't know if their nurseries are cute or not haha. Also yard sales have kid stuff super cheap. Doesn't have to cost a fortune to have a sweet little one!

As for working too much, you will just have to see what works for you, but my plan is to work full time still but start early at 6 am and be done by early afternoon to have time with her and also cut down on childcare costs. (I work from home). You can always adapt as your needs change

Student loan stomper

  • 5 O'Clock Shadow
  • *
  • Posts: 34
  • Location: Texas
Re: Case study - Please help me make a plan for our future!
« Reply #6 on: September 07, 2015, 02:42:45 PM »
Thanks again guys!!


As for working too much, you will just have to see what works for you, but my plan is to work full time still but start early at 6 am and be done by early afternoon to have time with her and also cut down on childcare costs. (I work from home). You can always adapt as your needs change

Yes, this is a small part of why I want to change jobs.  Currently I am a teacher, which so many people think of as the ideal family job, I have to disagree (especially in a large city).  I work 6:30a.m.-5p.m. most days, 6:30a.m.-9p.m. (1-8 times a month) other days, and occasionally 7a.m.-3:30p.m.(1-8 times a month).   I also don't think I would have much more to give my own kids after giving to other kids all day.  Summers are great, but by the time I do all the training and work on my todo list from the rest of the year I have very little time left as it is.  By realizing this now I am hoping to develop skills by the end of the school year to allow me to work a job that has steady hours(maybe even a part time option), more flexibility, or both, otherwise we will end up with so much in day care costs...  then once I am FI I can do work on my terms with kids teaching in a way that is more suitable for my family.

LizzyBee

  • 5 O'Clock Shadow
  • *
  • Posts: 65
Re: Case study - Please help me make a plan for our future!
« Reply #7 on: September 08, 2015, 01:59:02 PM »
Hello! I won't respond to all of your questions, just the one regarding children. I was a former teacher so I totally know what you mean about teaching not being a family friendly job. I was working 60 plus hours every week when I was teaching and was always stressed out. I moved into another job within my district (first a peer evaluator, and now I work in central office writing curriculum and creating/facilitating professional development for teachers). In my current position, I mostly work 40 hours a week sith the exception of weeks or months when there is a huge project I'm working on. So...maybe there is another more family friendly position within education that you could pursue? What really help me is to get my masters in a high needs area (teaching English language learners), it opened up a lot of job opportunities for me.

You may want to wait to quit your teaching job until after your child is born to take advantage of any maternity leave benefits. I had to "pay" for my maternity leave with my sick and personal days, but I had 6 months worth of days and so I took 6 months of leave with my son. Then, you could finish out the school year and quit to stay home with your child.

I started my journey in mustachianism when I was pregnant with my son. He's now 3 and I also have a 2 month old. My husband works a .75 schedule so he gets off early on Mon and is home all day on Tuesday with the kids. I'm considering .8 schedule, if my boss will allow it. It is totally worth it to have more time with the kids.

That being said, I feel like we are so far from early retirement and that we are moving along at turtle speed even though our savings rate is about 55%. If I could do one thing differently, I would have saved vigorously for another year or two before starting to have kids so that I felt like we had a good head start. At times, I feel desperate to retire early so that I can be more present for my children, but I know I still have so far to go (10 more years).

One of the things you could do, if you feel you want/need the extra cash, is to watch another child in your home while you are a stay at home mom. Where I live, childcare is scarce and costs a ton so stay at home moms can fetch up to $10-$13 an hour to watch a child in their home.

I just wanted to share some of my experience to see if it may be helpful to you, as you think through your own. Best of luck to you!





Student loan stomper

  • 5 O'Clock Shadow
  • *
  • Posts: 34
  • Location: Texas
Re: Case study - Please help me make a plan for our future!
« Reply #8 on: September 11, 2015, 06:32:22 AM »
LizzyBee!  Thank you so much for assuring me that I am not crazy!  I have been pondering getting my masters, but I am not sure what to get it in.  There is a tech company that offers some really awesome training opportunities (very low cost, and 70%+ job placement with them and even higher with other partner companies) I am thinking of doing that this summer and if I get offered a job with them I can easily quit teaching as their starting pay is only 2K less than what I make here but they have better benefits.  I currently teach music, but I think I could teach lessons on the side to fulfill that side of me (and make up the 2K pretty quickly).  My thought is if I worked full 9 hour days and taught 4 hours of lessons a week I would still net about 6-12+ hours of my time back a week.  And both things are better for potential family starting.  I encourage you too because even if you have 10 years left to RE in 10 years your kids will be in middle school which is some of the most important time to be with them, and they will also remember them.  So I know you would love to be with them every minute, but do feel good about your efforts because it will be rewarding!!!

Saving in Austin

  • Stubble
  • **
  • Posts: 183
Re: Case study - Please help me make a plan for our future!
« Reply #9 on: September 11, 2015, 03:40:40 PM »
Here is the place where we invest in VTSAX in our HSA:

http://healthsavings.com/

Good Luck!