The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: sunshine on November 18, 2013, 07:30:03 AM
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Please no face punches! I've been reading here a long while and finally decided I need to get some input. I admit I am kind of hesitant of getting blasted over a few issues.
~We have no debt.
~Family of 4. 2 kids in college next fall ( covered)
~Home paid for worth $200K ( $4k taxes we are in a higher tax state)
~Retirement funds right around $60K. My spouse is contributing 20% to his 401k. As the numbers will show we felt safer in cash and just jumped this the last 2 years.
~I just added up and with our emergency fund and cash accounts it is $308K
Over the last two years I have taken from cash to fully fund an IRA for both of us. I do realize this much in cash funds is not doing us good as far as growth. I need to get over the fear.
We are a 4 car household but our children pay in full for all their car expenses. We have one very fuel efficient car and a truck. My spouse is not interested in biking to work at 4am. His job is very physically demanding.There is no public transportation. I am not physically able. We also use our truck for our cute little camper, hauling wood and hunting. I'll be totally honest here and admit my spouse wanted a pickup for many years. We waited until our last move when his commute was now down to 4 miles instead of 30. I also have responsibility for running my mother to therapy and Dr appts many times in week. We are ok with our two cars for now. Our part of the insurance bill is $798 per year. The kids pay their part.
No home phone but 4 cell phones. The kids pay for their own. My spouse and I pay $69 for one unlimited and one 1200 min plan.
internet and cable are $86. This is the first time we have ever had cable. It was never available when we were very rural. I would love to cut it but my spouse would have issue and rather cut the net. I wouldnt cut the net.
We support 6 rescue pets. I promised as they age and pass I will not get more thought I love critters.
The spouse will get a decent pension if he stays until 59.seems like an eternity away.
There are a few things we can obviously cut from our budget but since our income is not huge there are not tons and tons of things to cut. We have been pretty frugal we think.
Our biggest yearly expenses are food, taxes and travel.
Our friends and family think we are crazy.
I think we are doing ok for our income but I dont want ok. I think the goal needs to be much higher than ok. My fondest wish is for my spouse to not have to work! So here I am!
We are pretty decent at being frugal and saving $. I can make pennies beg for mercy in most areas. I'm hoping to get some direction on what to do with it to achieve our goals faster. I feel lost with what to do with it after saving it.
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Just based off of what you've written, I don't see the need for any face punching... you don't seem to have debts, have a nice chunk of change (even if it's earning almost nothing in a savings account), a paid off house, kids college covered and you're interested in getting your ducks in a row. You're in better shape than most people! And I'm in the same range as you as far as income, so don't think that everyone on here is a 6-figure household... there's a wide variety that I've seen so far.
So welcome. :)
The first thing to do is start figuring out what your goal is for early retirement - how much do you need to live on once you both quit the jobs? Include travel expenses and any other things that you'd see yourselves doing. Once you figure that out, you can see where you are, and start figuring out how to get there.
It's actually pretty great that you and the spouse know how to rehab houses. You can definitely invest your savings, but you have the option of doing that AND flipping/holding real estate as well. I don't know much about the landlord/property side, but it is definitely something you'll want to check into here on the forum as it's a steady income generator as well as being a decent long-term investment in itself.
As far as the investment side, if I was you, I would start maxing your spouse's 401K as that's money that comes out pre-tax, and reduces your taxable income as well - a win/win. As you are already maxing IRAs for the both of you (traditional or Roth?) then the next thing probably would be to open a taxable account with a broker (Vanguard is the favorite choice for their low fees) and get a good chunk of that savings to work.
I knew practically nothing about investing until the last year or so, and it's due to this forum/MMM and JL Collins that I sort of know what I'm doing now... so I'll throw out a few links that REALLY helped me. I was just as nervous as you probably are, and I really don't worry about the ups and downs now once I had so many good sources of information (and definitely tap the members on here too with investing and real estate questions - they are great!)
http://jlcollinsnh.com/stock-series/
http://jlcollinsnh.com/2011/06/14/what-we-own-and-why-we-own-it/
http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
As far as areas to cut, you'd need to post a more detailed budget for feedback. I do know that in the instance of your two cars, you probably could get better rates if his daily commute is under 4 miles each way and you're not driving every day - I'd shop around and also start examining your coverages. I also hope that your spouse is driving the fuel efficient vehicle for his commute, and only taking the pickup on days that you know you'll need the car.
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You're in pretty good shape. To be 44 and have two children in college, you must've had children young . . . yet you've avoided debt and paid off your house. That's great.
You say that college is "covered". Does that mean you have the money to pay it, the kids have scholarships, or you're borrowing? As long as you're not borrowing, I think you're in good shape there.
You are "short" on retirement savings, but I don't think that's the end of the world, given the other things you've accomplished. You're not in an ideal situation: That is, you're not in your 20s so that the magic of compound interest can work in your favor for decades . . . but with no debt /no housing expenses, you should be able to make retirement savings a big priority and start squirreling away money in a hurry.
On the other hand, you're "long" on emergency savings. In fact, I'm curious how a family with a 61K income and probably a 24-ish year work history accumulated 308K! Want to share some frugal secrets? I'd say a portion of that savings IS retirement, so -- keeping that in mind -- you're not really behind at all.
I personally don't think it matters all that much WHERE you save; rather, it matters THAT you save. Your husband's 401k is a good savings vehicle. With the kids in college, perhaps you'll be able to pick up more work hours and put that money all towards retirement.
Of course, I don't know the details about his pension, but I'd be a little leery of a pension that isn't supposed to pay off for 15 years. I'm 7 years away, and I'm hoping mine doesn't disappear. I would not make big financial decisions based upon a 15-years from now pension. Hope it'll be available for him, but don't put all your eggs in that basket.
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Thanks for taking the time to reply Frankies Girl. I appreciate it. I'm also glad to find not everyone here is pulling down 6 figures. I have to keep believeing it is possible without it. My spouse did get to take a trial run at another position pulling in another $39K a year and decided after 4 weeks to keep the old position. It was not worth the crazy hours, stress or having no family time.
I was worried about admiting to being a 4 car household and spending 10% of our income on travel to be honest. No we have not had debt in many years. Thanks Gram for making me scared to death of non property related debt!
I do need a number. I want that number to include lots of travel :) I always kind of figured we needed our current income of around $60K. Maybe our current budget would be fine minus the investing? One future expense that always makes me nervous is healthcare. Our household expenses should also go down once both the kids are out of college and in their own homes.
We do feel comfortable sinking our cash into buying and rehabing rentals. I have the time to run them. We understand a bit more about houses than investing. I will definately check out the forums here for more info. We had been kind of holding off making sure we had college covered. Since both kids chose a local university we are good.
I will look into seeing if we have enough in the budget to totally max out his 401k. We should if we cut out travel. I guess if not we could still max it out and use some of our cash for living expenses if needed.
We have our IRA's in Vanguard. They are not roths. I was told we wanted to reduce taxable income as much as possible with the kids going to college. Upon further inspection it does not matter. We have to many assets.
Thanks so much for the links! I will do some more reading. Investing makes me very nervous and always has. I have our IRA's in index funds and target date funds. Hubbys 401k is in the same. We also buy stock in the company my spouse works for since we can do just a few bucks weekly through payroll. I forgot to include that. I havent looked at it since we got the tax paperwork in January.
The $797 per year for car insurance is for two full coverage rides and the camper. Both are getting the leisure class discounts. We tend to buy gently used and keep them forever. They are a 2009 and a 2010. We also have an umbrella policy at 1 million. that cost $243 a year. The cost will drop this spring when the kids are adults and not under it. Even if I am not working hubby drives the truck usually with me running mom to therapy 4 days a week she can not get in the truck. It is pretty much a wash since I am making extra trips with her. However I am very glad I can help her.
I'll have to figure out how to get our YNAB budget info here. The kids will be glad to help their tech challenged mom when they get home. I can't see a lot of fat in the budget besides travel, cable and internet but am sure willing to let someone pick it apart and give me some more advice.
Thanks again!
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Welcome to the boards!!
I think you are doing great! Yes you could optimize a bit, but I don't see any facepunch potential here.
No debt, a paid off house and kids who are taught that they have to take care of their own expenses.
I can relate about being hesitant to invest. I was in a similar position. A good saver, with some cash, who had gotten burned with investments before.
So it did take a leap of faith for me to jump in and start investing, but I found a lot of good advice here on the boards.
I also can relate to your thoughts about the travel budget. I love travelling and we choose to spend our money there rather than on expensive cars or other stuff.
It's a choice you can afford to make if that's a priority for you.
Through this board I have recently discovered a couple of pages that work airline points and such. I don't need this right now, as I get points from work related travel, but I think
once we FIRE this will be an interesting option to keep travel cost reasonable.
You said you used the time you had on your hands to make your household efficient. Do you coupon?
You may be able to get down your cost for your food and pet expenses significantly by investing a little time here.
Let me know if you'd like some links on those subjects.
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Congrats you are doing amazing! To have no debt and a paid off house is impressive. To do that with a couple of kiddos and 60k a year is VERY impressive. The nice thing about the MMM lifestyle at your stage is that you don't have a "debt emergency" to take care of, or a need to build up a decent downpayment, etc. If you are interested (sounds like you are!) you could maximize your potential by investing some (most!) of your cash. But mostly - don't be so hard on yourself - you're doing great!!
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You're in pretty good shape. To be 44 and have two children in college, you must've had children young . . . yet you've avoided debt and paid off your house. That's great.
You say that college is "covered". Does that mean you have the money to pay it, the kids have scholarships, or you're borrowing? As long as you're not borrowing, I think you're in good shape there.
You are "short" on retirement savings, but I don't think that's the end of the world, given the other things you've accomplished. You're not in an ideal situation: That is, you're not in your 20s so that the magic of compound interest can work in your favor for decades . . . but with no debt /no housing expenses, you should be able to make retirement savings a big priority and start squirreling away money in a hurry.
On the other hand, you're "long" on emergency savings. In fact, I'm curious how a family with a 61K income and probably a 24-ish year work history accumulated 308K! Want to share some frugal secrets? I'd say a portion of that savings IS retirement, so -- keeping that in mind -- you're not really behind at all.
I personally don't think it matters all that much WHERE you save; rather, it matters THAT you save. Your husband's 401k is a good savings vehicle. With the kids in college, perhaps you'll be able to pick up more work hours and put that money all towards retirement.
Of course, I don't know the details about his pension, but I'd be a little leery of a pension that isn't supposed to pay off for 15 years. I'm 7 years away, and I'm hoping mine doesn't disappear. I would not make big financial decisions based upon a 15-years from now pension. Hope it'll be available for him, but don't put all your eggs in that basket.
MrsPete, thanks for providing some needed input for me. It didnt seem particular young at the time but I guess we were. Both kids will go next fall. The child that is going to the local state university has scholarship offers and will also be living at home. Our state schools are very reasonable and living at home is big money saver. The other child will be going to a technical program and living at home. He will have money left. Our children know exactly what we have for them and know it is their job to make use of it. Any left is theirs. Hence a big drive for the one to get scholarships as he wants some left. Hell would have to freeze over before we would borrow for college. We have to many friends with no $ saved but signed lots of college loans.
Before my body was destroyed I contributed more to our income. From day 1 we lived on hubbys income and banked mine. Interest rates didnt always stink. We have always been super frugal. We both grew up that way. My spouses company also has very generous benefits. We dont pay for health insurance and have excellent coverage for medical and dental. That has been a huge money saver for us.
We are tightwads besides travel. We now have cable for the 1st time ever. We had dsl or dial up forever before we decided to spring for the cable. No huge frugal tips. We did cloth diaper way back when, we grow a lot of our own food. I have a family of hunters and fisherman. We heat with wood. We dont go out to eat too much. We tend to have friends over and entertain instead. We shop resale. I cook from scratch. Just the boring basic stuff. I rarely use coupons unless I see one for toothpaste or something since everything is from scratch. I occasionally find one for dog food.
We do consider the cash retirement savings. It was fairly recent history that we decided we better get going with other retirement stuff. I wish I had started to learn sooner.
I can very easily work more hours once I'm done hauling mom all the time. Her therapy will only be a few more months. The dilemma is what I can do. I can not physically work at what I do more than I do currently though I do enjoy my work. I am more than willing to work a 40 hour schedule if I can find a job I can do.
Hubby is fully vested in the pension now. He just cant access it until he is older. 59 will be his 25. Theirs counts at 10, 15, 20 and up. I think we can count on it but I feel the same way about that I do with social security. I hope it is there but can't bank on it. I hope everyone gets their promised pensions. That makes me see even more how unprepared we are though.
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Welcome to the boards!!
I think you are doing great! Yes you could optimize a bit, but I don't see any facepunch potential here.
No debt, a paid off house and kids who are taught that they have to take care of their own expenses.
I can relate about being hesitant to invest. I was in a similar position. A good saver, with some cash, who had gotten burned with investments before.
So it did take a leap of faith for me to jump in and start investing, but I found a lot of good advice here on the boards.
I also can relate to your thoughts about the travel budget. I love travelling and we choose to spend our money there rather than on expensive cars or other stuff.
It's a choice you can afford to make if that's a priority for you.
Through this board I have recently discovered a couple of pages that work airline points and such. I don't need this right now, as I get points from work related travel, but I think
once we FIRE this will be an interesting option to keep travel cost reasonable.
You said you used the time you had on your hands to make your household efficient. Do you coupon?
You may be able to get down your cost for your food and pet expenses significantly by investing a little time here.
Let me know if you'd like some links on those subjects.
Hi there Frugal Zony! First I am going to apologize that I do not know how to multiquote!!!
Nope I rarely use coupons. They always seem to be for packaged stuff instead of basics. So it has not so far worked for us but I only see coupons on occasion since we dont get the paper. I occasional find one for dog food etc. in a magazine. We grow a lot of our own food , hunt and fish. I really need to look into it more for the pet food. Those fur babies food gets expensive. So where do I find pet food coupons?? I would love some links if you would be kind enough to supply them. Maybe I could save some cash and not have to cook everything from scratch! Sounds like a win.
Our grocery bills are really reasonable summer and winter. In the spring when we have tended to run through all the frozen produce it gets more expensive. I use a grocery deals site but usually find I am better of for the basics to hit Aldi's or the restaurant supply store.
We can put off travel after this trip we have coming up as long as we see the reward at the end. I might do a bit of pouting though but I'll get over it. I will have to do a search for the travel threads. I do run all expenses through a cash back card. I never though about a travel perks card. One of my kids had a pretty good sized car repair recently. He thought it was a win win when I told him I would share my cash back with him if he gave me the cash and had me pay with the card. My poor husband did an eye roll.
Thanks again and I'd love the links you mentioned!
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Welcome!
Honestly, sounds like you are doing badass :)
house paid for, money in the bank, kids paid for (KUDOS teaching them to fend for themselves a bit), expenses under control - you're doing A-OK!!
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Congrats you are doing amazing! To have no debt and a paid off house is impressive. To do that with a couple of kiddos and 60k a year is VERY impressive. The nice thing about the MMM lifestyle at your stage is that you don't have a "debt emergency" to take care of, or a need to build up a decent downpayment, etc. If you are interested (sounds like you are!) you could maximize your potential by investing some (most!) of your cash. But mostly - don't be so hard on yourself - you're doing great!!
ZSMOM~ Thanks that made me smile! That is very nice to hear.
It's fairly cheap living here besides property taxes so that really helps. Maybe the Midwest breeds financially conservative folks? In all seriousness our parents were all conservative and my depression era grandparents drilled " no debt, self sufficiency, share and save for a rainy day in my head. I so loved hanging at my grandparents house. Besides having a fantastic time with such awesome people I learned a ton. I didnt realize until much later that not everyone had grandparents like that. Lucky me :)
I am interested in investing more in the market and buying a single family rental or two. I want to do everything I can to see hubby quit working so hard!
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Welcome!
Honestly, sounds like you are doing badass :)
house paid for, money in the bank, kids paid for (KUDOS teaching them to fend for themselves a bit), expenses under control - you're doing A-OK!!
Thanks so much. We just punted and kind of went with the way our folks raised us. Seemed to work!
Whew am I grateful I got brave and posted! I was scared I might not like what I heard because I have read some harsh threads. Thanks so much for being welcoming everyone!
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Thanks for taking the time to reply Frankies Girl. I appreciate it. I'm also glad to find not everyone here is pulling down 6 figures. I have to keep believeing it is possible without it.
It's not how much you earn, it's how much you save:
It turns out that when it boils right down to it, your time to reach retirement depends on only one factor:
-- your savings rate, as a percentage of your take-home pay
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
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Thanks Eric.
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I decided to move all replies to a journal so I can keep track better :)