Author Topic: New to Mustachianism-Seeking advice  (Read 3955 times)

talladin

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New to Mustachianism-Seeking advice
« on: May 21, 2013, 01:18:33 PM »
Hello Everyone!

I recently found the Mr. Money Mustache website in my search for new and better ways of personal finance.  I wanted to post my family's situation and seek feedback/advice/second opinions on places to improve. 

Background
   My wife (29) and I (31) are married with one eleven month old child.
   We have a combined pretax income of 73250.  My wife makes 48000 and I make 25250. 
   Our normal monthly take home pay is 3665.  We can claim an additional 385 from a dependent care FSA account.
   The withholdings between us are the usual like health, dental, vision, disability and group life.
   We have just enough taken out to meet our 401k/pension plan matches.
   We also have 5000 taken out yearly for the previously mentioned dependent care FSA.

   We have two vehicles that are both paid for.
      A 2006 Chevy Impala with 96k miles.
      A 2008 Dodge Ram with 39k miles.  The truck was just paid off using the majority of the savings we had.

   We have a 2000 emergency fund set aside.

   Our debt includes one credit card that is at 2200.  This of course is my first priority to get rid of.
   My student loans total around 10250 with interest rates ranging from 2.4 to 6.8%.  They are currently in deferment.
   Our other major debt is of course the mortgage at 136k.

   Our job situation has us in stable jobs but with a lack of desire to change anytime soon.
   The company we both worked for up until late last year was bought out and they laid almost everyone off.
   I am going back to school for a second degree.

Monthly Budget/Expenses
   
Mortgage         907
   
Charitable Giving      25 (Monthly church pledge)

Utilities
  Electricity      150 (Average, varies monthly)
  Water/Trash      45 (Average)
  Gas         45 (Average, varies monthly)
  Cellphone      137
  Internet       40 (Contract price till next spring)
  Hulu         8
      
Food   
  Groc/House (150/wk)   600 (Budget amount, includes food, household items, baby supplies, personal items, etc)
  Eat Out (20/wk)   80
   
Gas (Budget amounts to cover usage and gas price variation)
   The truck is only used to drive me to work and take my child to daycare.  We use the car for almost everything else.
  Gas Myself      120
  Gas Wife      240
   
Clothing       20 (Cash and used as needed)
   
Pet Care   
  Grooming      30 (Dog is a rescue that is deathly afraid of water)
  Food/Supplies      20
   
Medications      4

Insurance   
  Life Insurance      6 (Child)
         15 (Term policy wife got years ago)
  Crit Care Insurance   32
  Auto Insurance      135
   
Personal   
  Daycare         620
  Hair         60 
  Gifts          40 (Cash and used as needed)
   
Misc          250 (Monthly budget to cover things like oil changes, baby items etc. Anything left goes to debt/savings)

Subtotal         3379

Misc          250 (Used to cover items like oil changes and extra baby supplies)

Total         3629 (Budgeted)


Constraints/Issues

   Moving - This is currently not an option and will not be for several years, if ever.

   Cars/ Commute - My wife and I both have a commute in which I drive 16 miles and my wife drives 54 miles.  My wife needs a few years experience in her current position and to finish a certain certification.  She will then have the qualifications to get a position that is closer and earn a lot more than she does now.  I just wish she had someone she could carpool with.  I could possibly get to my job using mass transit but I am the one that takes my child to and from daycare.  I have the only full size pickup in our combined extended families which I cannot trade in for a cheaper car.  In return for having it around and helping out family as needed I donít have to worry about things like my most of my childís clothing needs, toys etc. 

   College - I am currently working a second degree that will allow me to earn a good deal more when I am done.  For now it means taking on student loans in return for much better job prospects, pay, and stability. 

Short Term
   Electric - I am replacing our lights with CF bulbs and I need to get a programmable thermostat for the house.  We cannot air dry our clothes without issues due to the part of the country we live in.  I have been making better use of our ceiling fans to help cool the house and turning up the thermostat.

   Cell phone Ė I have finally convinced my wife that we should give up our stupid contract with ATT.  We have two Iphones that I will have unlocked when our contract runs out in August.  I plan to make a post later this summer asking advice once I have finished looking at our usage patterns.  I have seen the super guide and it is a marvelous piece of work.

   Food/Household Ė This is where I know that we need to work on reducing.  This amount will naturally lower when my child no longer needs formula and as many diapers.  We do need to better plan for cooking at home and eat out less if at all.  I have been looking into meal planning apps and websites. 

My wife and I probably need to look into getting enough term life insurance to provide for our child if the worst happens.  I also need to get some kind of short term disability insurance.

I also plan to finish paying off our credit card and then working on increased our emergency fund.  After that I just wanted to start paying down my student loans.

Long Term
My current long term goals revolve around having my wife finish her certification, get enough experience so she can get a position closer to home that pays better and reduce her commute.  I need to finish my degree up and similarly find a better paying position with a similar or shorter commute.  Our son will start public school in a few years which will greatly reduce his childcare costs and he wonít need things like diapers and formula anymore.  Included in all this is to keep our expenses down and start saving for financial independence!

I guess that lays everything I can think of on the line.  Please go ahead and lay it on me.


MtnGal

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Re: New to Mustachianism-Seeking advice
« Reply #1 on: May 21, 2013, 02:11:25 PM »
Welcome! Awesome job just finding this and deciding to try to work on your finances. That in itself is a big step. It sounds like you are looking for ways to change!

The easy things I see: Learn to change your own oil. That will save you a ton in the long run and get you more familiar with your vehicles as to not get ripped off at a mechanic. Also, $60/month for hair? That needs to change. As a woman, I understand the difference between a $12 hair cut and a $50 one, but once a month? That's $720 per year just on hair care.

As for the truck. Since you are on MMM, I'm going to talk about it. You are already justifying it. If you want to keep it, that's fine, but you should think a bit more about it. It is costing you about 2 gallons of gas a day just for your commute, with a higher efficiency vehicle you could easily cut your fuel costs in half! (Just to show you, at $3.75 per gallon, an extra gallon a day, 5 days a week, 52 weeks per year is $975. And that's just your daily commute. And guess what, that's almost half of what you owe in credit card debt.) Also, why do you have to be the one of your extended family to have a full size truck? Are you in charge of taking care of a family farm? Perhaps you should let someone else in the family get a truck if they absolutely need it. You do not.

mustachecat

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Re: New to Mustachianism-Seeking advice
« Reply #2 on: May 21, 2013, 03:25:47 PM »
Well, you already know that your monthly budget is incredibly tight. On the plus side, you'll feel any changes you make immediately. Good for you on getting started!

$150/month on electricity seems very high to me, although this could be a regional thing. What's the square footage of your place, and how many kWh do you use in a month? Ditto gas. Do you use it for cooking, heat, or both?

Is the $6/month life insurance policy ON your child? If so, why do you feel like you need this? Are there family health problems that might make your son difficult to insure in the future? What's the reasoning behind the critical care insurance?

Does your wife also breastfeed and/or pump? If not, it could help you save on formula.

I would break out the grocery/household budget line into separate lines for groceries, household items, baby supplies, and personal care items. They're all very different kinds of expenses, and you'll want to know how much you're spending on each. Ditto on your misc. Since you included baby items in both lines, that suggests that you don't really know where your money is going. Use Mint, or a notebook, or Excel, or whatever you like, but track every penny you spend for a month. It's really illuminating!

What is your second college degree in? And how are you absolutely confident that it will lead to a better job and not just new loans?

MattC

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Re: New to Mustachianism-Seeking advice
« Reply #3 on: May 21, 2013, 03:57:54 PM »
In general, you might gain some insight from refining your budget a bit more and categorizing things.  You do have $500/month as miscellaneous.  Also, your auto expenses are not all together; putting them together would let you see your total automotive expenditures and quantify how much extra your vehicles cost over the optimally cheap 8-12 year old compact sedan/hatchback.  Perhaps you still do need a truck, or alternately, maybe you find that the truck costs (including depreciation) an extra $4k/yr whereas the fam. could just rent trucks for 2k/yr to do those occasional truck-requiring jobs.  With the cars, remember that your values are decreasing by their depreciation, so that is a kind of "prepaid" cost.  Edmunds has a good format for calcluating automotive cost of ownership (although their specific numbers may be off in your case). 

I think by switching from an Impala to a comparably valued compact+more reliable sedan you could easily save $1k/yr.  Also, maybe you can drop collision on this vehicle if you haven't already.

You should have a 2% cash back credit card (Discover Escape; Barclaycard arrival etc.) and for you, probably the 5% back on gas Salliemae card.  Those would add about $60 to your monthly bottom line, not to mention the fat sign up bonuses some of the cards now give out.

"Insource" grooming?

I personally would axe critical care (assuming that's an additional health insurance policy) and all life insurance.

Pay off the credit card with the emergency fund (an emergency can be funded via credit card) unless the convenience of the cash cushion in paying your bills is worth the interest.  Then put all future savings towards the higher rate student loans.

Abe

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Re: New to Mustachianism-Seeking advice
« Reply #4 on: May 21, 2013, 04:26:44 PM »
Good job on trying to balance your budget.  Do you have a Costco or Sam's Club with a gas station nearby? My family lives in a city with high gas prices, filling up at Costco saves us at least 10% on average. Even with the $50 annual fee, this would amount to about $300 in savings a year.

Pay your credit card balance with your emergency fund.  Credit card debt is an emergency! It doesn't have to be all at once, if that would be unpalatable.

Your electricity bill is quite high.  If you live in a hot, humid area, open the windows at night and use ceiling fans to blow out the hot inside air. This, along with the programmable thermostat, will save you a lot of money.  Keep a fan running in the room you are in, and set your thermostat a few degrees higher.

Good luck!

ScubaAZ

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Re: New to Mustachianism-Seeking advice
« Reply #5 on: May 21, 2013, 04:52:52 PM »
I'm sure you'll get great advice on the rest, but I just wanted to offer some assistance re: the dog grooming.  I used to be dog groomer in my former life (for about 5 years at a very busy shop, so I can pretty much say I've seen it all).  If you have questions about how to work with him/her to make grooming at home possible, feel free to reply or message me.  There are ways to teach him a bath is okay and something he's going to have to deal with on a regular basis.  I'm guessing by the price that he is either little and hairy (possibly needing an actual haircut) or large and short-haired (infinitely easier to groom at home). 

27Jennifer

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Re: New to Mustachianism-Seeking advice
« Reply #6 on: May 21, 2013, 04:54:29 PM »
Hi there, I think you are off to a good start but can you clarify the baby items in more detail? You have it listed 3 times. I have 2 kids and don't think I've ever spent more than $28 in a month for them as babies. Breaking down these misc or household categories maybe enlightening to you. Good luck!

Lans Holman

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Re: New to Mustachianism-Seeking advice
« Reply #7 on: May 21, 2013, 05:32:35 PM »
The withholding seems high.  My wife and I make about the same amount each year but take home more each month.  Did you end up with a big tax return?  If so you're essentially borrowing money at a high interest rate (your credit card) to lend it to the government for nothing.  You could also look again at whatever your employer is taking out to make sure it's all working for you.

MountainFlower

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Re: New to Mustachianism-Seeking advice
« Reply #8 on: May 21, 2013, 09:47:48 PM »


Does your wife also breastfeed and/or pump? If not, it could help you save on formula.



I'm no expert, but you can't really just start breastfeeding if you aren't already, can you? 

To the OP, at 11 months, you can probably start switching to milk.  Buy Kirkland formula at costco if you can.  WAAAAAY cheaper and the same as the name brands. 

little_owl

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Re: New to Mustachianism-Seeking advice
« Reply #9 on: May 22, 2013, 03:15:24 AM »
The previous posters gave great advice.

Here are some opportunities:
- Those vehicles are not very efficient, and you have to ditch that truck.  You are not responsible for being the only truck owner in your family, and renting a truck for a day can be done for less than a tank of gas at my local enterprise.  This is a huge money suck.  The Impala is also not very efficient, but I would start with the truck.
- Good job on the cell phones, that will save you at least 100.
- Where is your out of retirement investing?  This is where any saved money should go.
- Hair, Gifts, Insurance all have opportunities to cut.  More than 50 a year is insane for hair.  You have that nearly every month!
- Misc looks like it has some opportunity - that is a fair amount for "whatever" try to figure out what is in there pand trim it down.

Good luck!  Keep us posted.

talladin

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Re: New to Mustachianism-Seeking advice
« Reply #10 on: May 27, 2013, 10:24:42 PM »
Thank you for the replies everyone!  Sorry it took a while to respond but the family and I were visiting some friends out of town.

I have tried to respond to everything mentioned so far.  I still have some work to do on revising my budget and further tracking some expenses.

Tracking expenses:  I have been using Quicken since 2011 which does allow me to break down most of our expenses.  I need to start working to break it down further for our household expenses.   This will go double for our misc expenses.

Withholding: Ours is set high enough that we do get a decent refund back.  I had planned to have the credit card paid off by June but my wife had to have a minor surgery a month ago that is the cause of most of the credit card debt.  I will look into our withholding's and having them decreased for at least the short term.

Hair: The 60 my wife and I spend is 56 plus a 4 dollar tip.  The breakdown is 20 for mine and 36 for my wife.  We both have quick growing hair and she keeps hers in a layered style that takes monthly cutting.  We have both tried the 16 dollar local equivalents and came out with horrible cuts more often than tolerable ones.  It might be possible to use a trimmer for my own hair but I do not know what else to do for my wife.  I will speak to her about something to reduce the costs but with her work environment and hair I do not see a single yearly haircut in her future.

Second degree:  My first degree is in business administration with an information system major.  The second degree I am working on is for accounting with a plan to get my CPA once I graduate.  My first degree was from a lack of goals in college and that mistake has caused issues since then.  My wife is an accountant as well so we have good connections for our area and I have some experience with bookkeeping and management.  At this point I just need the piece of paper saying I have the background for it.

Oil/ Mechanics: This type of thing is on my list of life to dos.  For now I usually get to use coupons to save cost or include things like free tire rotation.

Gas: We use the discount from our local Krogerís.  We are members of the local Samís but too far to save on gas and we only shop their every other month.

Electricity: This is a currently budgeted amount based on my past houses in the area.  I have been working to reduce our current usage in the new house so this should be lower than expected over the next year.  The amount is higher than some of are used to I would expect because I am in a wet /hot part of the country.  This house is 2050 square feet total but the ac a 400 square foot room attached behind the garage.  The house has electric for everything except heat.

Insurance:  My wife has insisted on a child life insurance policy as a just in case since her family has a lot of health issues.  The same goes as the reasoning for the critical care insurance.  I do not think we need the child policy but I have not been able to convince her otherwise.  My current plan was to wait and then convince her to drop the policy.  My wife has had some health issues that have not required the critical insurance but I personally feel we will need in the future.  I do not personally feel we are at a point to drop all life insurance yet I was honestly planning to get a term life policy for my wife and I until we reach a point where they would be of no benefit to our soon or the other if something happened.

Formula/ Baby supplies:  We plan to switch our son to milk once he is past the one year mark which will lower this cost.  He currently has been using two cans of formula a month at 22 each, a box of diapers for around 47 and wipes at around 6 dollars a month.

Pet grooming:  I had been planning to try washing our dog myself and maybe clip her nails.  Iíll have to get back to you on how this works out.

Non retirement investing:  I had not planned to worry about this until my debt is paid down.  Honestly until my son is out of daycare or my wife and I see a sizable income increase we do not have the income to spare.

Gift expenses: We use this to buy gifts and cards for birthdays and events including Christmas.  I would rather not cut this any deeper.

Vehicles: My wifeís car serves well enough and averages about 28 highway mpg for her going to and from work.  The latest Honda/Toyota models earn around 33 so I am not really worried about her car.  My truck is going to continue to be an issue but at this point it is paid off, low mileage, and reliable.  I will have to look into how much it would take change am I am not fond of the idea of picking up another car note.

Thanks for the feedback everyone.  It helps to have a different perspective and advice.