Hi Everyone!
I've been reading various PF sites recently and have been glued to the forums the past few days. As my wife and I are both finally employed we're trying to organize our budget in the most effective manner, so I thought I would ask everyone's advice and would appreciate any tips that the forum members may have.
A bit of background - I'm 26, my wife is 24. We jointly make ~132K and live in a highly-taxed, high COL area. I would like to go back for my MBA in a few years (2-3?), hence a strong goal of mine is to "minimize" as much as possible income that would be available on a FAFSA. I haven't researched this too much, but it's to my understanding that retirement funds aren't considered on the FAFSA form though would be available for use to pay educational expenses...so it's to my benefit to max those out - the question is just in what capacity and which investment vehicles.
Our monthly budget:
1) Rent - $1,100
2) Car payment - $515 - my wife needs a car to get to work and we just purchased a certified used car. Our only debt (we have no student loan or CC debt) is this car loan for $17K for 36 months at @2.04%. Both of our families keep cars 10+ years until they're no longer usable, and we plan to do the same. Again, due to wanting to go back to school in the near future, I took out the loan for only 36 months with it being such a low rate to accelerate payments now and didn't want to throw down the ~20K in cash as it would highly deplete our savings.
3) Parking - $250
4) Tolls to/from work - $200
5) Gas - $200
A word about Parking, Tolls, and Gas - $650: We don't live in the safest area, and with parking being tight and having a car broken into already, we decided to have peace of mind and splurge for keeping the car in a garage. We're thinking about moving to an area closer to where my wife works, which would get rid of the parking, tolls, and half the gas, but for the 2BD we'd want it would be an increase in rent of about $600, so the savings in the end would be a wash.
6) Subway (to work) - $100
7) Car insurance - $109
8) Health care - $0 - wife works for large healthcare system, as long as you visit their hospitals you only pay co-pays, no premium.
9) Food - $250
10) Utilities - $80
11) Other - $100
12) TV/Internet - $0 - we live near a University with free wifi and just watch TV over the internet
Total - $2904
We've both been putting away 10% into our 401k (Vanguard)/403b (MetLife) plans (comes out to ~1K a month all together), with work matching .25 per dollar up to 6% and my wife's company only matching after she's been there a year. Our total take-home pay after those contributions is ~$6500. Additionally, we put aside 10% of our net pay (after 401k) for charity, which is $650 a month. That leaves us with take home of $5850 - $2904 (total monthly expenses above) for a monthly surplus of = $2946 (having already put aside 10% of each paycheck into 401k/403b).
Additional funds:
Savings: $35K
Investments: $26K - a) ~$4,600 in Roth I opened up in my name over a year ago, b)~$1,700 in newly opened 401k/403b, c)$8K in DIS (held since I was born), d) rest in taxable investment accounts
Debt: ~$17K - auto loan (explained above)
Questions I have are:
1) Emergency fund - As we have $35K sitting in savings earning about nothing, I feel that I should cut that to 18K (3K monthly expenses x 6) and invest the other 17K. Does this make sense?
2) Investments - Where should we invest the 3K surplus a month plus the 17K from savings? We are already contributing 10% to 401k/403b - how much should we bump that up? My one BIG mistake was missing out on 2012 Roth contributions for my wife and myself....I know, big mistake, but let it only be made once. We still have the same money, just the $11,000 will be taxed a bit differently. I need to open a Roth for my wife as well. How should we divvy up the funds between Roths, 401k/403b, and other IRAs? Majority is now in different Fidelity and Vanguard mutual funds, but I would like to get my act together and plan out a more focused investment strategy across all the different accounts/investment options.
3) Future expenses:
a) Child - we're trying to have a child and we would be more than thankful to have all expenses associated with a child in the near future. My wife is a nurse so thankfully she works 3-4 nights a week which would minimize daycare expenses. She plans to go back to work after giving birth. Best way to save for this?
b) MBA - I plan to go back to school for my MBA in 2-3 years and would like to minimize the amount of stated income available on the FAFSA. What is the best way to go about this?
I very much appreciate anyone's advice and thank you in advance for any help/tips offered!