I've been following MMM for one year. I posted a case study December 2014, and we were in very bad shape- behind on two mortgages, car payment, and two credit cards. We've paid off about $25k in credit card debt over the last year, and traded in our clown car for a Corolla. Today, we're about two months away from zero credit card debt, and I'm starting to formulate my next steps to FI. I recognize having a car loan is not ideal, but I'm ready to focus on saving for retirement. I've done as much research as I can stand, and I believe I have a strategy. However, I would like to get the opinions of like-minded folks on the MMM forum. The background:
1. I am a federal government employee, with 14 years of service.
2. Married, with one 14 year old daughter.
3. 2015 AGI was approximately $65k (in the 15% tax bracket).
4. My gross salary is about $80k.
5. Spouse's gross salary is $24k.
6. My current TSP balance is $40k, at a contribution level of 10% (my agency matches to either 5 or 6%)
7. Spouse's current 401k balance is $1500, at a contribution level of 6% (his company matches to 6%)
8. My current Roth TSP balance is 0
9. Spouse's current Roth IRA is zero. I created one for him yesterday at Scottrade, but haven't funded yet.
Current debt:
a. $4,000 on a credit card with 15% interest (as I said, about 2.5 months till paid off!)
b. a car loan of $16k at 4.74% interest (4 year note, just started- we had a lot of negative equity from our previous clown car)
c. two mortgages: primary home ($274k note @ 3.75% and 30 years, balance of $250k); and rental home ($130k note @ 3.5% and 15 years, balance of $100k).
Regarding my daughter and college- right now, my fuzzy plan is (assuming she decides to go to college; I've told her the Navy, Air Force and Coast Guard are great options to grow up, get paid, and earn that GI Bill) is to pay (in cash) for two years at a community college, IF she agrees to live at home (saves me lots). At that point, I hope to be in a better position to help her with the next 2 years.
Given the generics of my situation, in 2.5 months (when CC is paid off) my plan is:
1. Start contributing $289 a pay period to my Roth TSP (about $5200 by end of year)
2. Maintain contribution to my Traditional TSP at 10% (about $8300 by end of year).
3. Maintain spouse's contribution to his 401k at 6% (about $1500 by end of year).
I want to do these step from now until 12/31/16. By then, the credit card will be paid off, and a very good chunk of the car as well (beginning double payments in 2.5 months; this will be at a slower pace than the credit card because I want to focus on retirement, and I think the car interest rate is low enough that this seems reasonable).
Starting FY2017, I want to change our focus a bit, and max out Roth's:
1. contribute $10k to Roth TSP, with remaining $8k going to traditional TSP (coming from my 5% contribution and agency match of 5%).
2. contribute $5500 to spouse's Roth IRA, and maintaining his 6% 401k contribution. Any raises he gets would go toward increasing his 401k contribution.
Does this make sense? I believe I'm allowed to also open an additional Roth IRA for myself; is that true? If so, I would then begin the process to fund $5500 a year into that. Sorry for the novel- I'm not sure what info you guys would need to make an informed opinion; so I threw most everything in.