Wow, you guys rock. Thanks. Let's see if I can address all of your points...
Hex, any reason you aim for 1 year of living expenses?
Prepube, I think you may have missed my point. I admit that I am great at saving but don't know the first thing about investing! That's why I'm here! I do believe that folks here can understand my situation and do have relevant experience - this is why I'm posting, asking for advice, as opposed to reading. Reading posts, I find so many situations that are NOT similar to my own. Of course the underlying financial principles are the same, but I learn best by understanding the principles first, then learning how to apply them. I have had difficult doing this simply by reading about others' experiences, which is why I proactively asked a question. Did I really deserve a facepunch for asking a question? I get that the facepunch is a "Mustachian thing," but what I *really* needed was the link that you included at the end, *not* a facepunch. Just something to keep in mind when you're interacting with strangers on the internet. So, thank you for the link, that's a great place to start.
Bank, I like the way you approach this. I agree that your situation *right now* seems similar to ours - though again, baby might change that quite a bit. So, I appreciate you sharing what you are doing, and also for pointing out the underlying principles that have led you to making the decisions you have made.
Skunk, that's a really good point. Plus, our PITI payments are currently MUCH less than what it would be to rent a similar home, but we get the security of knowing we need to live here forever with the same payment (at least for the next 10 years). As our real estate market here is on the up-and-up, that gives me good peace of mind.
Zizi, thanks for the resources. I guess "high interest" really is a relative term, eh?
Frugal, ok, let me see if I can be more specific about our expenses. This is a direct ctrl+c ctrl + v from our budget spreadsheet.
Net Income $ 5,790 (after taxes & after pre-tax retirement - note that we are expecting to have to pay extra taxes as we are having less withheld from our paychecks for this year.)
Retirement (Roth IRA) $ 846
Housing
Mortgage $ 517
Taxes (School + Property) $ 355
Home Insurance $ 44
Internet $ 15
Utilities $ 100
Extra principle payments $ 250
Total Housing Budget $ 1,282
Variable Expenses
Food $ 425
Transportation $ 375
Variable Expenses $ 300
Home Maintenance $ 185
Home Improvement $ 200
Total Variable Budget $ 1,100
Personal Allowances $ 440
Total "Expenses" $ 4,053
Income minus expenses $ 1,737
Additional savings "envelopes":
Baby (in 2 years) $ 150
New car (in 5 years) $ 175
What's left over $ 1,412
So, when I'm talking about my straight-up living expenses, I'm thinking, "what is the minimum we would need if we were really in a pinch." This means suspending retirement savings, other savings, personal allowances, improvements for the house, and so on. Then our expenses would be our mortgage, taxes, insurance, internet, utilities, food, transportation, and "variable expenses" (everything from soap to a pillow to socks). This works out to $2,131 per month and could totally be trimmed (e.g. we RARELY spend the full $300 on "other," I'd ditch the no contract smart phone which is currently paid out of my personal allowance and would get a basic $20 line, etc). So, that's where I get the $24k from.
In terms of "contingency funds"...
We are already budgeting for the car repairs as part of our regular transport expenses. Our actual transport expenses are more on the order of $100-150 per month, so I roll over the un-used funds month-to-month for when we need to buy new tires or something). $375 is an actual real average from the past 18 months or so and has included some not insignificant repairs.
Our house is relatively new and we aren't anticipating any major repairs in the next 5 years. When it does need a new roof (which will probably be in about 5 years), we will perform that work ourselves (we've got the skills and the tools, plus our house is pretty small, it's an easy job).
Anyway, my point is that all of the things that could require "contingency funds" are actually planned expenses, not big emergency surprises, for us. The two big ones right now will be replacing the car in about 5 years and having a baby in 2. I'll probably add a roof fund in about 2 years, depending on what happens with kids. Other than the aforementioned meteor going through the house, I can't think of what else we should be planning for. Simple life = low needs = less stress. :-)