Author Topic: Case Study, help me get my finances together!  (Read 2866 times)

ajfarmswell

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Case Study, help me get my finances together!
« on: September 23, 2016, 01:20:10 PM »
Young professional here (Both my wife and I are 22) who just discovered the MMM way of living.  Frugality is not necessarily my first instinct, but I am willing to accept the challenge.  Ironically enough, I am in the financial planning profession (sitting for the CFP exam in November), but would like input on my situation to have views outside of my own (Dr. not diagnosing himself etc. etc.). 

Income:
Me-Varies based on bonus, but lets say $4,000/mo net
Wife-$1700/mo net
-I defer 7% with a 3% match to my Simple IRA
-Wife defers 15% with a 1.25% match to her company 401(k)

Expenses:
Home-$813
Tithe-$500-700 (depending on income)
Groceries-$400
Restaurants-$200 (Bad, I know)
Utilities (Water/Sewer+Electric)-$250/mo --Our electricity rates are pretty high with Vectren
Gas-$150/mo
Shopping/Gifts-Probably around $50-100/mo
Mobile Phone-$60
Y Membership-$45
Internet-$25
Monthly Gifting-$25
Pet (1 dog)-$20

Assets:
Cash-$6,000
Simple IRA-$8,200
Rollover IRA (Previous Employer)-$3,000
Company 401(k)-$600 (she just started working)
Home-$134,000
Cars ('04 Solara & '98 Avalon) $7,000

Debt:
Me student loan:  $5,300, 4.5% interest, $57/mo
Mortgage $124,000 4% interest, P&I+escrow $813/mo


This constitutes the bulk of our spending.  We will take day trips to other cities from time to time for fun, but tend to shy away from spending money on fancy hotels/restaurants and the such.  Only other upcoming expenses not accounted for would be Christmas (usually budget around $300-400 for our families), and visiting my sister in France next summer ($2,500, we will stay with her so the only cost is plane ticket).

We have paid off her two student loans in the past 6 months, will pay off mine within two months from bonus money, and are faced with either paying down mortgage debt or contributing to investments (real estate or qualified retirement accounts).  Really curious to get input on how we could continue to reduce our expenses (I'm sure you all will hit me on the groceries/restaurants), and best utilize our free cash flow.  Thank you for being a cool community!

boarder42

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Re: Case Study, help me get my finances together!
« Reply #1 on: September 23, 2016, 01:27:01 PM »
Home seems fine
Tithe seems high but whatever personal choice
groceries arent too bad - thats what we spend including booze and throwing lots of parties
restraunts definitely need to lower that to say 50 or better 0
you utiilty rates seem insanely high to me for being in Ohio
gas is fine
50-100 on shopping and gifts PER MONTH plus 300-400 at xmas - this needs to be way lower
Phones are really good
Ditch the gym membership
internet is really good
How many places do you have gifting broken out here - you gift the church 700 - you have shopping and gifts at 50-100 you have a monthly gifting category at 25 ... you have a xmas gfiting budget of 300--400.  you're gifting away too much money IMO.

cars seem resaonable.

mortgage interest rate is high.  how long have you had this loan 30 year fixed are in the mid 3's right now REFI that.

You could get 2 Citi American Airlines cards to easily cover the cost of that plane ticket and make that trip free. 



ajfarmswell

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Re: Case Study, help me get my finances together!
« Reply #2 on: September 23, 2016, 01:33:20 PM »
I did forget to mention Auto Insurance $100 aggregate through State Farm for both of our cars.  Mortgage is 1 yr old. 

boarder42

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Re: Case Study, help me get my finances together!
« Reply #3 on: September 23, 2016, 01:41:59 PM »
I did forget to mention Auto Insurance $100 aggregate through State Farm for both of our cars.  Mortgage is 1 yr old.

refi that mortgage you missed the ultra bottom 2 weeks ago but rates are pulling back again after the fed didnt raise we bought in feb 2016 at 3.625% just REFI'd(no cost) at 3.25%.  and you're only carrying liability right? those cars are old enough.  the cost likely comes from your age?  I'd still shop around. 

slugline

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Re: Case Study, help me get my finances together!
« Reply #4 on: September 23, 2016, 02:16:58 PM »
refi that mortgage you missed the ultra bottom 2 weeks ago but rates are pulling back again after the fed didnt raise we bought in feb 2016 at 3.625% just REFI'd(no cost) at 3.25%.

Did you end up with a bigger loan balance? My understanding is that's how the new lender makes money on "no cost" refinances.

Ebrat

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Re: Case Study, help me get my finances together!
« Reply #5 on: September 23, 2016, 10:21:38 PM »
Be realistic about your travel expenses. The only cost will be your plane tickets?? Probably not--you'll go out to eat more that usual (and pay for your sister, because you're staying for free), maybe take a short trip somewhere else while you're there, etc. Nothing wrong with that (and exactly what I do when I visit family overseas), but make sure you account for it.

Are the expenses you listed out from actually tracking or from guesstimating? The above makes me think guesstimating, but you know what they say about assuming. You would probably benefit from tracking everything for at least a little while. e.g., you estimate your income at $4,000/mo, but what does it really average out to, over the course of several months or a year?

obstinate

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Re: Case Study, help me get my finances together!
« Reply #6 on: September 24, 2016, 12:46:43 AM »
refi that mortgage you missed the ultra bottom 2 weeks ago but rates are pulling back again after the fed didnt raise we bought in feb 2016 at 3.625% just REFI'd(no cost) at 3.25%.

Did you end up with a bigger loan balance? My understanding is that's how the new lender makes money on "no cost" refinances.
Normally you accomplish this by selling points. (You take a slightly higher interest rate.) The larger the mortgage, the easier it is to get no-cost. If you're growing your balance, then it's not no-cost.

boarder42

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Re: Case Study, help me get my finances together!
« Reply #7 on: September 24, 2016, 04:52:29 AM »
^^^^ this is correct. Also look into travel hacking those plane tickets as well as the rest of your travel

ajfarmswell

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Re: Case Study, help me get my finances together!
« Reply #8 on: September 24, 2016, 06:03:22 AM »

Are the expenses you listed out from actually tracking or from guesstimating? The above makes me think guesstimating, but you know what they say about assuming. You would probably benefit from tracking everything for at least a little while. e.g., you estimate your income at $4,000/mo, but what does it really average out to, over the course of several months or a year?

Fair point about the sister. We will probably end up helping pay for some groceries, and may take a day trip to Spain. The expenses listed out are both from tracking and guesstimating. I have used mint for over 2yrs, so I have a pretty solid idea on the expense side of what's happening. The only thing that historically has been more was the restaurants around $400-500/mo, but we have been making a concerted effort to reduce that in the last six months. My income is very backloaded on the year. I make much more during the fourth quarter than the first three. If we end up doing the same amount of business next year, it would average out to around $4,000. If we had a good year, it would be around $5,000/mo.

ajfarmswell

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Re: Case Study, help me get my finances together!
« Reply #9 on: September 24, 2016, 06:07:02 AM »
refi that mortgage you missed the ultra bottom 2 weeks ago but rates are pulling back again after the fed didnt raise we bought in feb 2016 at 3.625% just REFI'd(no cost) at 3.25%.  and you're only carrying liability right? those cars are old enough.  the cost likely comes from your age?  I'd still shop around.

Gave a call to the bank to get break even analyses for 15 & 30 year terms. Yes, we only carry liability. It's mostly due to our age, but also partially because State Farm is a bit more expensive relative to competitors.

boarder42

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Re: Case Study, help me get my finances together!
« Reply #10 on: September 26, 2016, 02:05:32 PM »
refi that mortgage you missed the ultra bottom 2 weeks ago but rates are pulling back again after the fed didnt raise we bought in feb 2016 at 3.625% just REFI'd(no cost) at 3.25%.  and you're only carrying liability right? those cars are old enough.  the cost likely comes from your age?  I'd still shop around.

Gave a call to the bank to get break even analyses for 15 & 30 year terms. Yes, we only carry liability. It's mostly due to our age, but also partially because State Farm is a bit more expensive relative to competitors.

you dont need a bank to do breakeven analysis for you ... you need to learn how that works yourself.  no reason to go to a 15 stick with the 30 and invest the difference just get a lower fixed rate.