Help A Young Couple Starting Out With Advice

[bigskyrookie]

My wife and I need your help creating a blueprint for early retirement on a meager income. A blueprint that allows for travel, and good living all while retiring at age 50. I just graduated with a Masters Degree , we just purchased our first home, and my wife and I are both 25. We are ready to start our long road to being mild mustachians. At this point we have $11,000 in a savings account (What should we do with this?). Starting Sept 1st we are expecting to have a combined income of $79, 000.00 a year (pre-tax). Conservatively our anticipated expenses are:

Mortgage: $1,400 a month
Utilities: $220 a month
Insurance: $200 a month
Gas: $220 a month
Dog: $180 a month
Groceries/Dining: $780 a month
Cell Phone Plans: $50.00 a month
Entertainment: $80.00 a month
Miscellaneous: $200 a month
Car Insurance (2 cars): $150.00 a month
Retirement Plan automatic contribution: $400 a month
Savings Account Contribution: $450 a month
Home Reparis Account: $580 a month
Car repair/ replacement fund: $ 2,800 for the year
Medical Fund: $2,200 for the year
Travel: $5,500 for the year

Spending Allowance Total: About $71,430


Please share your ideas on how to save, invest, and use this money to complete our goals! Thank You!

[Spudd]

I would hang onto the 11k in the savings account as-is, and consider it your emergency fund. You're a home-owner now, so big expenses can crop up unexpectedly.

[FrugalSpendthrift]

Is the difference between your $64k income and your $50k spending all taxes?  or is there other money not allocated?

For a rough target, you'll need around a 35% savings rate to go from zero to retired in 25 years. 
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

[JCfire]

My wife and I need your help creating a blueprint for early retirement on a meager income. A blueprint that allows for travel, and good living all while retiring at age 50. I just graduated with a Masters Degree , we just purchased our first home, and my wife and I are both 25. We are ready to start our long road to being mild mustachians. At this point we have $11,000 in a savings account (What should we do with this?). Starting Sept 1st we are expecting to have a combined income of $64,000.00 a year (pre-tax). Conservatively our anticipated expenses are:

Mortgage: $1,380 a month
Utilities: $180 a month
Insurance: $200 a month
Gas: $200 a month
Groceries/Dining: $620 a month
Cell Phone Plans: $50.00 a month
Entertainment: $50.00 a month
Miscellaneous: $90.00 a month
Car Insurance (2 cars): $90.00 a month
Retirement Plan automatic contribution: $150 a month
Savings Account Contribution: $250 a month
Home Reparis Account: $400 a month
Car repair/ replacement fund: $1,200 for the year
Medical Fund: $2,000 for the year
Travel: $4,000 for the year

Spending Allowance Total: About $49,520



Please share your ideas on how to save, invest, and use this money to complete our goals! Thank You!

I agree with the suggestion to keep your 11k in the savings account as-is, as an emergency fund.  That looks like about 4-5 months of basic core expenses for you.  I think that means you don't need a "savings account contribution" of $250/mo -- I would suggest putting those funds into a tax-advantaged retirement account of some sort, either a 401k or IRA.

$400 a month for home repairs is about $5000/yr, which seems very high for a house on which you only pay a $1,380 mortgage.  Maybe worth cutting that back to 1% of the house's value per year unless there are other considerations, and putting the remainder in 401k contributions or similar.

$620 /month for groceries and dining for 2 people at your income level is the next most likely place you could cut if you're looking for a place.  If you're feeling really ambitious you could have as a goal to spend about half that.

Wherever you set your spending level, at age 25 the more important things are the following: first, do as much of your savings as possible within tax-advantage accounts like 401ks, IRAs, and HSAs.  See the Mad Fientist blog for more detail here.  Invest in the Vanguard total stock market fund (or failing that, another low cost index fund) to minimize investment costs and save yourself the delusion of being able to expect any better than those returns over the long run.  And when you get raises, try to hold your spending constant, or at least only increase it much less than the amount of your raises.  That is the least painful way to generate large amounts of savings over the course of your career.

Good luck.

[ltt]

I would hang onto the 11k in the savings account as-is, and consider it your emergency fund. You're a home-owner now, so big expenses can crop up unexpectedly.

Agree wholeheartedly.  Don't invest it--just leave in the bank where you can access should you have major car repairs, an appliance break down, etc.