Topic Title: Reader Case Study - moving to a new city, buying a house & car
Life Situation: Married, filing jointly in early 30s with one dependent (infant age), living in HCOL PNW
Gross Salary/Wages: ~$180,000- goal is to make this. DW has a lot of opportunity for well paid OT and DH is self-employed at a much lower rate of pay. DW: $142,358 (base is $116k and OT is ranked at $90/hr), DH: $37,642
Pre-tax deductions:
403b: $18,000
Solo 401k for DH: $18,000
Health insurance: $4176
Dental insurance: $576
IRA x2: $11,000
FSA: $500
Total: $52,252
Other Ordinary Income: None
Qualified Dividends & Long Term Capital Gains: None
Rental Income, Actual Expenses, and Depreciation: None
Adjusted Gross Income: $127,748
Taxes:
Standard deduction: $12,700
Personal exemptions x3: $12,150
Self-employment deduction: $2879
Taxable income: $100,019
Federal: $10,452 + $6029 = $16,481
State: None
FICA:
DW: $7,886 + $2064 = $9,950
DH: $5759
Total taxes: $32,190
Current expenses:
Rent: $1200
Cell phone: $105 (2 smart phones with 2gb data LTE)
Gas: $30 (will live within 15 miles of DW's place of work, DH works at home. Unable to bike to work as DW is on-call while she works at another facility and may need to jump in the car at any time)
Toiletries: $20
Spending money: $120 ($60 each per month)
Car insurance: $45
Rental insurance: $12
Life insurance: $96 ($500k on DH and $1 million on DW, both term insurance at 30 years, ~5 years in)
Food: $420
Netflix: $11
Electricity: $50-100 depending on time of year, average $75 from what I've read
Water: $40 (average form what I've read)
Internet: $60 (estimated)
Charity: $834 (we are Christians- 10% of our after tax income)
College savings: $446 (will go up if/when we have a second child- roughly the amount of money needed given inflation over next 18 years for the state's public university)
Total Monthly Expenses: $3,514
Total Yearly Expenses: $42,168 + $660 (2 extra paychecks since DW is bi-weekly paid, food+spending money)= $42,828
Yearly expenses:
License renewal (required for DW job): $300
Christmas/Birthday gifts: $500
Car registration: $33
TurboTax: $40
Total: $873
- Probably missing some expenses here...
Total leftover income in theory: $51,857
Assets:
DW 403(b) Account #1 (Fidelity): $20,423.38- will be able to roll over to IRA once I leave old job
DW IRA (Fidelity): $41,290.99
DW Traditional IRA (Vanguard): $31,402.57
DW Roth IRA (Vanguard): $11,341.46
DH Traditional IRA (Vanguard): $16,063.98
Total: $120,522.38
Paid off car: 2009 Toyota Yaris with 80,000 miles worth ~$5107 according to KBB
Savings: $1,000
Total Assets: $126,629
Liabilities:
DW Student Loan: $29,646 altogether ranging in interest from 5.16% to 6.16% with monthly payment of $685
DH Student Loan: $9,113 interest at 2% with monthly payment of $220
Total: $38,759
Specific Question(s):
- Moving to a new city, starting a new job with a significant pay raise (to the tune of $18k) for DW but a bit higher COL
- Would like to save money for a down payment on our first house during our first year of living in new city (new to DH, but DW grew up there). House budget probably around $250k, which should get us a 3 bedroom house, maybe 1500 square feet. We've lived in a 1 bedroom apartment for our whole marriage under 1,000 square feet, but have found that we will really need at least another bedroom now that we have a baby and all the baby paraphernalia. I don't even think that we have much (crib, rocker, swing, extra dresser for clothes & toys, activity mat), but it does take up space.
- Would like to buy another used car (DH has his heart set on a Chevy Volt to get a hybrid- is this a good choice?). We had a second paid off car, but it was totaled in some spring floods awhile ago (got a check for $3k from insurance, which was nice). Because DH works from home as self-employed, the house isn't on fire as far as getting another car, but he can't drop me off at work to keep the car because I am "on call" at another facility where I have to jump into my car and go if I get called (I work in healthcare).
Questions:
- Should we pay off the student loan debt (particularly DW) before saving for a down payment?
- Is a Chevy Volt a reasonable car to buy? Probably will spend $15k, will not get a loan
- Does it make sense to back off on retirement contributions in order to save quicker for down payment? Will probably aim for at least 10%- is this a good number despite having to pay for PMI?
- Should we do roth IRAs instead of regular IRAs or should we do the tax deferred IRAs now and convert them later on to a roth IRA?
- Once we get a house and car, do we put the extra $$ that isn't in tax-deferred accounts into the regular market knowing that we will have capital gains tax? Or is it better to just pay down the mortgage?
- Thinking about buying some land and building a dream house one day. If this is the case, is it better just to save as much as possible for it or to pay off as much as possible on the mortgage that we will get?