This blog and forum have a funny way of simultaneously making me feel like I'm on the right track, while also making me feel like I have no idea what I'm doing at times. So I found out about these Case Studies, and thought I'd give it a shot. My main question is what do I do with my surplus? I know there are a handful of VERY anti-Mustachian line items below, but I'm not necessarily writing this post to find out how to maximize my surplus (right now at least), just what to do with the current one. This might be backwards for many of you, but one step at a time I guess...
Life Situation:
- Married, filing jointly, two exemptions
- My wife and I are 27 and 29 years old, respectively
- No kids
- Reside in Parker, CO
- Gross Combined Salary: $136,250 ($36,250 and $100,000)
Pre-tax deductions:
- My 401(k):
- $462 per paycheck ($12,000 per year (12%))
- Employer matches 4% ($4K per year)
- Her PERA:
- $230 per month
- HSA:
- I contribute a measly $12.50 per paycheck to my HSA
- Her employer contributes $100/mo into her HSA, and she contributes an additional $50/mo
- Insurance:
- Dental: $9/mo
- Combined Medical: $70/mo (HDHP)
- Vision: $8/mo
- Additional after-tax Insurance:
- Spousal Life: $1.50/mo
- Supplemental AD&D: $10/mo
- Supplemental Life: $18/mo
Adjusted Gross Income: $7,586/mo
Taxes:
- Colorado income tax rate is 4.63%
Debt:
- Mortgage:
- $299,300 at 3.75% (brand-new home as of June 2016 that appraised at $450,000, put 30% down, so no PMI)
- Monthly Payment is $1,721.13
- Principal and interest: $1,389.30/mo
- R/E Tax Escrow: $83.33/mo
- Hazard Insurance Escrow: $48.50/mo
- Extra Principal Payment: $200/mo
- One Car Loan:
- $11,250 at 2.99%
- Monthly payment is $225
- A little over 4 years left on this, assuming no extra payments
- Regular rolling CC debt, paid off in full every month, no fees
Current Expenses:
- Car Insurance (Two cars): $115/mo (includes various discounts, like paying for 6 months at a time)
- Internet: $65/mo
- TV: $100/mo
- HOA: $90/mo
- Water: ~$75-100/mo
- Electricity: ~$75/mo
- Cell Phone: $135/mo
- Gas: ~$55/mo (fluctuates of course, but this is a 2yr average)
- Netflix: $8/mo
- Google Music: $8/mo
- Misc Expenses/Entertainment/CCs: $2500/mo (somewhat high estimate. and it includes several of the expenses listed above)
Assets:
- Savings and Checking: $58,500
- Fidelity 401(K) (previous employer): $56,900
- ~90% 2050 Fund
- ~10% previous employer stock
- Betterment Traditional IRA (rolled over from previous employer): $24,400
- Betterment Taxable ‘Build Wealth’ (90/10): $11,500
- Currently moving $500 every two weeks from Savings into this Build Wealth account
- Colorado PERA: $8,000
- Combined HSA balance of $4,300 ($2600 of which is investment eligible, is that recommended for a HSA?)
- Merrill Lynch 401(K) (current employer): $2,700
- Vanguard 2055 Target Retirement Fund
- Currently contributing $12K per year with $4K match
- Individual Trading Account: $775
- A single ‘buy and hold’ stock that I’ve had for quite a while. I haven't touched this account in years.
- Home (about $150K in equity)
- Two cars (one with the $11k loan mentioned above, the other is fully owned)
Rough Cashflow Estimate:
$7,586 Gross Adjusted Income
($1,611) Mortgage/HOA
($200) Extra Principal Payment on Mortgage
($100) TV
($55) Gas
($75) Electricity
($226) Car Loan
($1,083) Transfers to Betterment 'Build Wealth'
($115) Car Insurance (although I pay in 6 month increments)
($2500) Combined CC payments, no fees
($122) Misc/surprise expenses to help me get to a conservative and round number
$1,500/mo surplus
The answer on what to do with this surplus might be obvious to many of you, but I'm struggling with the options.
- Increase my extra principal payments on my mortgage? (highest interest rate of my two loans, but not by much)
- Aggressively pay off car loan because it's relatively small/manageable? (psychological benefit more than anything maybe?)
- Increase my contributions to the taxable Betterment account?
- Increase my 401(K) contributions?
- Increase HSA contributions?
- Find another investment vehicle? (I've been interested in trying Lending Club)
- Keep growing the rainy day fund? (Though I think the current one is strong enough as is)
I, like many of you, would like to retire early. I just have no idea how early (or late) is realistic for me.