Author Topic: I need a sounding board  (Read 3710 times)

Ftao93

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I need a sounding board
« on: April 16, 2014, 05:37:30 PM »
Fellow Mustachians, since none of my family are on the same page, I thought I'd present my 'evil' plan here, and if you have any advice, awesome.

Combined income:  @60k a year.  I turn 38 this year, my wife 27.

Debt:  3000, no interest until November (wife's debt.)

Motorcycle:  9k left.  Payments are $180, but I get paid @ $300/mo in mileage to ride it.  I try to put that + 200 in payments so it will be paid off fast.  Loan is at 5% otherwise.  I should not have purchased new!

We ride scooters or walk otherwise.  During bad weather we'll get a car2go to meet our needs.

Rent $725 (average rent here is $1200!)

Net $62, we share with our landlords for a small discount on rent.

Utils:  avg $100.  utils can be pricey since this is an old house.  I may ask for help sealing up the windows next Winter!  We don't use AC.  Sometimes a portable swamp cooler if we're dying.

Phone:  $50.  Mine is paid by corporate, she's on family plan with the inlaws.

Groceries: 200-300, though we're trying some things to see if that can average @ 150.  Just need to cook more meals from scratch and freeze them.  Half of our eating out is that we don't feel like cooking.

Insurance for all vehicles is @$50

Gym for both of us is $80.  We have some space, so I may just buy some simple equipment and eliminate it after this summer, though we get a lot out of it.

401k is at about 10.5k, and we will have @ 3k in cash this month.   

Current rate is 15% into the 401k, with my company matching 3%.  She puts 5% away.   I also JUST started a Roth IRA at 3%.

So my plan is to pay off the debt before interest hits at all, while padding the 'cushion'.  Once we have have it built up to about 6k, that is roughly 4 months of emergency funds, even including far too much discretionary spending.  At the same time, I want to turn my 401k up 1% every month or so.  This way the money doesn't come to me to do stupid things with until it's invested.

My wife will graduate this year.  It's  a simple degree that may or may not lend itself to getting more $$, but if nothing else she'll be able to work more hours, at which point I will have her put more into her retirement accounts, up to the point we're both maxed.

What I want is for us to have a good, comfortable amount in retirements accounts in @ 10 years (I'm certainly open to it being much sooner!).  Depending on what job she moves to, we could potentially retire at that point, or move to part time work.   I don't despise my job, I just don't want to be a slave to it.

My overall question then is:  Sound reasonable?  Anything you'd change?

Thanks in advance!
« Last Edit: April 17, 2014, 06:46:29 AM by Ftao93 »

gooki

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Re: I need a sounding board
« Reply #1 on: April 17, 2014, 01:05:08 AM »
Nice plan. Making your investments automatic is a great way of guaranteeing success.

Ftao93

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Re: I need a sounding board
« Reply #2 on: April 17, 2014, 06:47:35 AM »
Indeed it is!  It's also the best way for ME to avoid going "oh, well I'll save more later, here's another motorcycle I want..."

Can't spend it if I can't get my grubby little hands on it :P.

Rebecca Stapler

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Re: I need a sounding board
« Reply #3 on: April 17, 2014, 07:20:44 AM »
It's interesting that you don't list your $9k loan as "debt." It is debt, and unlike your wife's current 0% interest debt, it's accruing 5% interest per year. Paying it off with $300/month isn't going to get rid of it for at least 2.5 years. Before you start bumping up your 401k contributions, I would get rid of that motorcycle debt.

I'm also curious if you've evaluated the benefits of contributing to your 401k versus a Roth IRA. Do you like the funds available through your 401k? At your current tax bracket, does contributing pre-tax to a 401k make more sense than contributed taxed income to a Roth IRA?

It seems to be that at $60k/year (minus your current 401k contributions), it might make more sense to max out your Roth IRAs before upping your 401k contribution. $5500 each is the max, and your 3% contribution is only about $1800/year.

But don't take my word for it -- crunch the numbers yourself. I'll admit I prefer my Roth because our 401k options aren't funds that I would choose.

Ftao93

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Re: I need a sounding board
« Reply #4 on: April 17, 2014, 07:51:53 AM »
The motorcycle debt is debt!  I probably just didn't format my OP very well.  When other things are paid off (my wife's CC debt would have a MUCH higher interest rate) I'll be shoveling probably more like 1k/mo at the motorcycle.  Once it's no longer financed the insurance will go down @ $60/year.  Hardly preventing us from buying Little Timmy his medicine, but every little bit helps.

I upped the 401k first because it is 1) matched to a degree and 2) comes out pre-tax, so I notice the difference much less.  Both are currently funded through Fidelity.  The 401k is a target date fund that can be changed if I decide I want to retire earlier, etc.   I haven't been able to discern which would be better.  Certainly open to maxing the Roth first, so long as it's invested.


LibrarIan

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Re: I need a sounding board
« Reply #5 on: April 17, 2014, 08:04:26 AM »
Maybe the interwebz is just more expensive where you are, but $62/month while sharing seems high. I pay $35/month  (10mbps down) and I do not share with someone else.

Regarding the gym, I highly, highly recommend P90x and working out at home. While this may be ethically grey, as far as I know all the P90x, P90x2 and P90x3 videos have been uploaded in various places around web, making them free. All you need is a set of exercise bands, some hands weights ranging from 5 lbs to about 35-40 lbs (which you can pick up over time as you improve off Craigslist or yard sales), a chair, a mat, a little space and a pull up bar/play gym/unenclosed staircase and you're pretty much set for life. No gym membership.

Dump as much money as possible toward that debt! Debt free is the way to be.

MsSindy

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Re: I need a sounding board
« Reply #6 on: April 17, 2014, 09:42:35 AM »
So, I'm confused.  How exactly would you be able to retire in 10 years?  It sounds like you'll have a healthy 401k account, but you'll only be 48 then.  I didn't see any plans for monies to go outside of that account.  Also, are kids in the picture?

Or is the plan that you keep your expenses extremely low (forever) and your wife works part-time to cover them?


Ftao93

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Re: I need a sounding board
« Reply #7 on: April 17, 2014, 10:05:15 AM »
We should be able to keep out expense low (and even lower them), at least for that long, since our landlords are our best friends.  At that rate, we might not have enough for ER fully.   Depends on how markets do and what my wife makes during that time.   Eventually I do want to put money in an IRA for her at Vanguard.  I'm not sure if her 401k is matched at all.  Realistically we can 'live it up' on 25k a year, so the rest can be invested.   'Retirement would more likely mean part time work for both of us, or working at a lower rate at something I enjoy more.

Not really anticipating her being at Home Depot forever, but one of the good things about it is that it's very close to the house.  If they ever build a sidewalk that goes there she could walk. 

No kids are in the picture, and cats are relatively inexpensive.  We thought about kids, but she's not really domestic, I'm the breadwinner, and we'd end up eventually having to move farther from work, thus making us have a car, etc.   Just not interested in doing that.  Her father is also in the earlier stages of Parkinson's, so we'd like to be nearby to help.

Unfortunately we live where there are only 2 internet providers, Comcast and Centurylink.  They're very aware of this.  I tried to get rid of even basic cable, but they then up the fee for not having it.  If I went with the other provider, I'd have to replace my equipment, plus they get you by forcing you to have an activated home phone line, 'just to carry the DSL signal'.  This is actually total BS, but they have us by the short and curlies.    Overall with the discount provided on rent, we pay $35 for stupidly fast internet + local channels, which we barely utilize.

I trained in martial arts for over 20 years, and have had some good experience with personal training/bodybuilding, so I'd really like to just pick up some gear off CL was mentioned.  The local gym is great (we walk there), and they do offer a lot for your money, but $80/mo is expensive.  The 'good' part is that we go more due to the "well, we're paying for it, we HAVE to go...". 

Using the same principles, BodyrockTV, Zuska,  and a few other services are totally free, using only the same equipment.

Thanks for the responses, there's a lot of 'oh yeah, I'd need to plan for X' ideas in there.