How are we doing and what can we be doing better?

[hoyahoyasaxa]

Hello fellow Mustachians!  I am relatively new to the blog, but everything I've read has really hit home with me.  Both my wife and I are seeking out ways to achieve financial independence, and I wondered if I could present my case study here to get an idea from you all about things we're doing wrong, and what else we could be doing in terms of investing and saving to become FI.  I'm 27 and until recently have worked in market research and my wife is 26 and works for a museum.  Here we go:

Income

Me: Had been making $47k/yr until mid-November when I was laid off from my market research job.  Now searching for work again (hopefully will not be a long process- have a graduate degree and live in NYC) and receiving $385/week take home from unemployment.

Wife: Manages the collection (read: artifacts, not money) at a museum and makes $38k/yr

So, prior to my layoff, our take home pay was about $5200/month, now until I find work again we'll be getting about $3600/month take home.

Current Investments:

Roth IRA: $8K.  With Fidelity, have been following the DecisionMoose model for some time but am growing weary of it and am not sure Market Timing fits into my investment philosophy.

Rollover IRA: $18K.  Also with Fidelity and also following DecisionMoose- this was a rollover from my first job where I'd had a 401K.

Wife's 403b: $5K.  She doesn't know much about investing and seems most comfortable putting it in a 2050 target fund with Schwab.

Lending Club: $5K.  Just started with Lending Club which I feel far more comfortable with as an investment tool - I'm comfortable working with data as that's what my training is in and I spent quite a bit of time creating the filtering strategy that I believe will be successful.

Savings: $72K.  Of this, we have $30K in a 3-year Ally CD at 2% (this was money for a home down payment that I wasn't willing to subject to risk) and $42K in our savings account with TD Bank.

Expenses - based on our expense tracking for 2012

Rent: $1525/month (more than most probably spend for a 1-bedroom, but good luck finding a decent one in NYC in an area where you won't get shot).

Student Loan: $400/month (my wife's parents bought out her student loan and we are paying them back at 0% interest each month- we have ~$35K remaining).

TV/Internet: $47.99/month (we cancelled our cable months ago and pay $40/month for Internet with Time Warner, and $7.99/month for Netflix.

Gas/Electric: Depends on the season, ranged between $70-$110 per month this year.

Cell Phone: Currently $110 - I have an iPhone with Verizon ($95) and my wife has a basic phone on her parents family plan for $15/month which we reimburse them for each month.  I am in the process now, however of selling my iPhone 4s which I should be able to get between $250-$300 for which would cover the cost of breaking my contract early (about $230), and buying a basic phone for an MVNO plan.

Groceries/Dining Out: They fluctuated wildly from month to month but we're getting better.  At one time we had food costs as high as $750/month.  Last month we got all food costs down to under $300 and this month we're doing well so far and are at about $200 so far.

Car Expenses:  $333/month.  Have a 2001 Jeep Cherokee Sport that I received as a gift when I graduated high school.  It's paid for, but expenses still exist for gas/tolls/insurance/repairs.  We absolutely do not need the car and I'm ready to get rid of it.  We use it generally to take trips down to my folks' place in DC and to my wife's folks place up in Rockland County.  Other than that, it's just one time instances (i.e. my buddy got married and we drove the car up to Tuxedo, NY for the wedding).  The thing is, we can take the DC-NY bus to go down to DC, we can take NJ transit to go to my wife's parents and given how often we visit, the costs would be more like $100-125/month.  I should be able to get $4500-5000 for the car, as well.

Public Transportation: $47 per month - this is buses and train, not including subway ($104/month) which is deducted from paychecks.

Charitable giving: $100/month - we give to our church each month.  My wife would love to give more- I'd be willing to if we can make it work.

Travel costs: $132/month - we spent $900 to go to St. Lucia for a belated honeymoon (the rest was paid for via a wedding gift), and had a distance wedding (Tennessee) to attend for close friends this year.

Genealogy: $60/month- this is my wife and my big hobby and we feel it's important to investigate family history- this money goes towards ordering records and the cost of an Ancestry.com subscription.  This is one of the few costs I'm completely fine with.

Medical: $85/month - my wife pays a very low premium and thus we had to pay a bit more for medical costs when some issues arose for her this year.

Laundry: $50/month- $1.50 wash/$1.50 dry in our building - we do four loads per week.  We could save $25/month if we got a line dryer.

Gifts: $300/month - this one pissed me the hell off.  Much of this stems from us being in three weddings (two of my best friends and her cousin) and so we had costs associated with attending the bachelor/bachelorette parties.  I'd love to hear ideas about how to avoid these costs in the future.  For instance, we have 4 weddings to go to next year already (2 sets of very good friends, and 2 of my wife's cousins) and one of them is in San Antonio- looks like it'll cost us $800 to attend this wedding (as much as I hate to say it, we really can't miss this one- they're two of our very best friends).

Miscellaneous: $175/month - all other expenses including clothing, concerts/sporting events, books.

All told, including the loan payment, our output over the last year has been $4000/month with income of $5100/month.  Here are the action steps that I see being necessary to take.  I welcome all other help- I'd really appreciate it.

1) Goodbye iPhone, hello basic phone- $85/month saved
2) Better control over food spending - $200/month saved (assuming we keep it to $300/month)
3) Ditch the car, take public transit - will receive one-time payment of $4500-$5000 and a monthly savings of $255 (getting rid of the $333 monthly car expenses and increasing public transit costs to $125/month).
4) Line dry the laundry - $25/month saved
5) Gifts- we need ideas on how to live within a gift budget- HELP!
6) Miscellaneous- These other expenses need to be controlled too.

[jnik]

3) Ditch the car, take public transit - will receive one-time payment of $4500-$5000 and a monthly savings of $255 (getting rid of the $333 monthly car expenses and increasing public transit costs to $125/month).

I don't see parking costs listed. Did you somehow manage to swing an apartment with a parking space (in which case, find out if you can stop renting the space or sublet that thing out!) or have you been doing the street parking shuffle?

4) Line dry the laundry - $25/month saved

No need to "get a line dryer" to start saving on this. Very next load, just hang your shirts on clothes hangers while wet, and hook 'em over the shower rod or something. I have an extra expanding shower rod, something like $7, that I use just for drying clothes. You can drape other things over chairs if you want. Then getting a drying rack will be a luxury. (I recommend metal, not wood--it's a little more expensive, but I got sick of wooden racks breaking.) When I had an apartment with cabinets on both sides of the kitchen, I also picked up a clothesline and ran it back and forth between the cabinets, tucked behind the doors to hold it up.

Basically, this is such an easy expense to cut out, and the investment to do it Cadillac-style is so small, that you shouldn't even be reading this response ;)

[hoyahoyasaxa]

We park on the street outside the apartment- just have to move it once a week for alternate-side street sweeping.  And I'll give the shower rod idea a try!

Also, forgot to point out in the original post, but if there's anything that needs clarification or that I neglected to include, I'm happy to explain.

[needmyfi]

I think you are trimming your spending really well already, congrats.  I have only one question/observation.  You mentioned savings for a home, when and where? The only expense I see that is really out of scale with most around the country is rent.  I'm not sugesting for  a minute that you move to Hoboken to save on rent, or that 1500 isn 't the going rate in NYC.  1.5 k rent is a high percentage when take home income is 5 k.  Just wondering if you were planning on buying outside of NYC and if so could you move now?  No judgement if the answer is no f.ing way.  I lived in NYC in my 20's.  My life and priorities are different now but I get it

As far as gfts go...any skills or  talents?  I made a really nice rug for free with recycled material but I have mad crochet skill.  The bride had registered for a handmade one on etsy that was 300 and was thrilled to get one made by someone she knew.  Her mother in law had wedding guests send her fabric 2 months before the wedding and made a quilt. If  you have friends that intend to start a family, could you do geneology research for them on both sides of their families, leave a spot for future kids and then pay for some nice presentation?

[hoyahoyasaxa]

In terms of a home, we're looking to live near lower Rockland County - my wife is part of a big wonderful Italian family who all live near each other in that area and see each other all the time.  So, it's important to us that our future kids grow up in the same familial environment.  So, this would mean a home somewhere in Rockland County, Westchester County or Orange County, NY or in Bergen or Passaic County, NJ.  One thing to think about however, is if we move and are still working in NYC, we'll be paying transportation costs that we're not currently paying for NJ Transit (~200 bucks each/month), but I suppose when you factor in that we'll be putting equity into a home, perhaps it works out.  Our lease is up next September and if we can, I'd really like to move.

I love the idea of finding a thoughtful way to give a wedding gift that's not too expensive.  I feel like we're in the mindset where it's automatic that we just give a $100 or $125 check.  But reflecting back on our wedding, we had a friend who gave us a wonderful print on canvas of the chapel at Georgetown University where we went to school.  It was one of our favorite gifts and I can't imagine that it cost very much- certainly less than $100.  I guess the key is just getting ourselves out of the way of worrying that we'll come across as cheap if we don't give the standard $100 check.

[needmyfi]

1500 -200 travel gives you 1300 for rent in lower Rockland and you can get a feel for the commute before you commit to the mortgage.  See if you can get a short term lease with rent cheaper in Rockland when the current lease is up.

Long term friends will have long term memories of a personal gift.  Gifts that might be a little short on money spent, but long on sentiment and effort will be remembered a lot longer than a check.

Good luck.

[Apocalyptica602]

In terms of a home, we're looking to live near lower Rockland County - my wife is part of a big wonderful Italian family who all live near each other in that area and see each other all the time.  So, it's important to us that our future kids grow up in the same familial environment.  So, this would mean a home somewhere in Rockland County, Westchester County or Orange County, NY or in Bergen or Passaic County, NJ.  One thing to think about however, is if we move and are still working in NYC, we'll be paying transportation costs that we're not currently paying for NJ Transit (~200 bucks each/month), but I suppose when you factor in that we'll be putting equity into a home, perhaps it works out.  Our lease is up next September and if we can, I'd really like to move.

I love the idea of finding a thoughtful way to give a wedding gift that's not too expensive.  I feel like we're in the mindset where it's automatic that we just give a $100 or $125 check.  But reflecting back on our wedding, we had a friend who gave us a wonderful print on canvas of the chapel at Georgetown University where we went to school.  It was one of our favorite gifts and I can't imagine that it cost very much- certainly less than $100.  I guess the key is just getting ourselves out of the way of worrying that we'll come across as cheap if we don't give the standard $100 check.

I live in lower Rockland County. in the town of Pearl River, specifically.

Housing prices are ridiculous here. In 1994 my parents paid 180k for a 3bd 2bath house of 'modest' size. Now it's estimated at 400k with no real 'value added' in extensive renovations, just inflation and fluctuation in the market.

If you're looking to rent, apartments in the surrounding towns can be pricey as well (but not Hoboken or NYC pricey).

1-2 bedroom apartments along the NJ transit line into Hoboken/Secaucus (Spring Valley, Nanuet, Pearl River, Montvale, Park Ridge, etc) will run you ~1500 give or take a few hundred.

The prices here are so high because even the 'bad' neighborhoods in these suburbs are wonderful and safe places to raise a family.

My parents moved here from the Bronx when I was 4 and my father commuted every day to work in the jails where he was a Captain in the NYC Dept. of Corrections because he wanted my childhood to be in a single family home in the suburbs. A LOT of people share that sentiment, including yourself it seems.

My advice to you is you're already doing a lot of the right things. Many of my peers (I'm 24, not too much younger than you and your wife) would be aghast at the idea of giving up their iPhone, and would rather tweet from it about how they hate 'The Man' for causing college to be so expensive and them to be underemployed.

For what it's worth. I drive about 25 minutes to work in Bergen County, however I have many friends who do the morning train commute into either Hoboken / PATH or Secaucus / Penn Station.

Long train commutes aren't as bad as long car commutes. You can nap, you can read a book, you can do puzzles, you could study something that interests you. All of these things are unsafe for me to do during my drive to work. Haha.

As for the wedding gift, thought > dollars. If they're the type of friends who feel dollars > thought when they consider how much they enjoy a gift. Well then they don't deserve your hard earned dollars anyway.

Hope I was able to help. Just keep your head up and know you're already making great strides for you and your family.

[needmyfi]

Apocalyptica I am clearly stuck in the past with regard to prices in the NY  C area. I remember the 80's when Hoboken was a bargain!  Probably 25 percent cheaper than the city.  One idea that doesn 't work for everyone is to buy a house with a small mother in law apt, live in the smaller apt a couple of years and use the rent from the main house to pay down priciple.  You still get lower owner occupy rates on insurance, loan rates and maybe taxes (check before buying) .  When the kids come along, refi and move to the main house.  This can sometimes help young couples get into a high col area.  You have to be willing to be a landlord.

[Apocalyptica602]

Apocalyptica I am clearly stuck in the past with regard to prices in the NY  C area. I remember the 80's when Hoboken was a bargain!  Probably 25 percent cheaper than the city.  One idea that doesn 't work for everyone is to buy a house with a small mother in law apt, live in the smaller apt a couple of years and use the rent from the main house to pay down priciple.  You still get lower owner occupy rates on insurance, loan rates and maybe taxes (check before buying) .  When the kids come along, refi and move to the main house.  This can sometimes help young couples get into a high col area.  You have to be willing to be a landlord.

Haha yeah, I went to college in Hoboken to study Engineering, lived there for a number of years until I graduated in 2011.

Hoboken underwent an evolution from how it 'used' to be in the past 30 years.

Now it's essentially the 6th borough of NYC. In certain 'luxury' buildings along the river you can buy a 1 bedroom condo that's EIGHT HUNDRED square feet for the low low price of $900,000.

All the way up to a ~2,000sqft condo for around ~2,000,000. http://www.livingonthehudson.com/condo/W-Hoboken should be on the Anti-Mustachian Wall of Shame and Comedy.

Anyway, sorry for getting off topic.

Being a landlord is a great idea if you have the mind for it. Many properties in the area have way more space than a married couple in their 20's would need.

If you have the mind for being a landlord it wouldn't be a bad idea. Also while you're young and without kids, you'd probably be more open to the idea of not having your entire house to 'yourselves'.

[JanMN]

You guys seem to be doing really well - congratulations.  The one thing - you have a loan of 35k from family, and you have 42k sitting in a savings account.  The interest rate be dammned, I'd pay them back as soon as you get a job.  They would appreciate it, no doubt, and you'd be free of debt.  Something to consider.

[c]

4) Line dry the laundry - $25/month saved

No need to "get a line dryer" to start saving on this. Very next load, just hang your shirts on clothes hangers while wet, and hook 'em over the shower rod or something.

This is what we do. I do this with all my lady underwear (bras) and most of my my shirts. I hand wash sweaters and dry them flat-ish (hanging over the edge of the tub). To be perfectly honest this is less about being "frugal" and more about making my clothes look good for as long as they last. Those building dryers and washers are really tough on clothes.

[hoyahoyasaxa]

You guys seem to be doing really well - congratulations.  The one thing - you have a loan of 35k from family, and you have 42k sitting in a savings account.  The interest rate be dammned, I'd pay them back as soon as you get a job.  They would appreciate it, no doubt, and you'd be free of debt.  Something to consider.

It's certainly something that's crossed my mind, and the only thing stopping us is our desire to buy a home in the next year or two.  If we were having to pay interest on the $35k, then I would be singing a different tune and insisting we pay off the loan first, but since my wife's parents are in good shape (her father is a money broker on Wall Street), are good people who have never raised an issue with the arrangement (they offered to buy out the loan) and want us to live up here, I'm more inclined to go for the house and continue with the 400/month repayments.  Additionally, while I agree with the previous commenters that home values up in the Rockland/Bergen/etc. area are expensive, this is not the case for every home.  My wife and I are pretty simple people and we're looking for a modest 3br/2ba home- I've seen plenty up in this area in the 225-250k range on Zillow and Trulia.

[needmyfi]

You are wise to not payout the loan to the inlaws.  It is easy to see why having money for future emergencies is so important and even after you start working again it will still take you a few years to save that 35 k.  and alot more rent down the tubes. 
Looks to me like you have already figured out how to live on the 3600 until you find a job (but just barely)  and you need to keep that cash on hand.  BTW how long does the unemployment last?  You mentioned your wifes insurance, was yours through your work and if so will you have any extra costs associated like Cobra etc that you have not planned for?

[JanMN]

You guys seem to be doing really well - congratulations.  The one thing - you have a loan of 35k from family, and you have 42k sitting in a savings account.  The interest rate be dammned, I'd pay them back as soon as you get a job.  They would appreciate it, no doubt, and you'd be free of debt.  Something to consider.

It's certainly something that's crossed my mind, and the only thing stopping us is our desire to buy a home in the next year or two.  If we were having to pay interest on the $35k, then I would be singing a different tune and insisting we pay off the loan first, but since my wife's parents are in good shape (her father is a money broker on Wall Street), are good people who have never raised an issue with the arrangement (they offered to buy out the loan) and want us to live up here, I'm more inclined to go for the house and continue with the 400/month repayments. ..

I understand your point of view, definitely valid...  Family debt seems different to me than other kinds of debt.  Owing to family is an elephant that never goes away, no matter how logical the numbers, no matter how gracious the people involved.  I wouldn't care if they had millions and millions... I would still put paying them back asap ahead of buying a house.  It would be hard for me to say "I owe family 35k, but I'm going to buy this house, even though I *could* rent a while longer and pay them off first".  I understand you aren't saying that in so many words - I just couldn't do it.