Reader Case Study: "good enough" but not optimized

[Elliot]

Mid 20s couple with mutt, no kids, living in the USA

Income: 71K yearly
             self- base pay 59k +overtime and holiday opportunities
             partner- ~12k, variable (part time, just above minimum wage retail job)

Current expenses: ~3.4K
Bills
Rent 435
Phones 114
Internet 50
Electricity 70
Netflix 9
Hulu+ 8

Expenses of daily living
Groceries 250
Fuel 275*
Household goods 20
HBA(haircuts/soap/shampoo/haircuts/cosmetics, etc) 15
Pet food/supplies 60

potential expenses of daily living
Medical (copays, tests, medicine, equipment): 25
Clothing 75
Travel 50
Gifts 30

discretionary piss money
Restaurants 30 (usually for my out of town dr appts)
Alcohol 40
Spending Money 75 (including hobbies, monthly "date" activities)

education
my partner's- Tuition, books, fees  1350
mine- Student Loan 188 (168 minimum+20 extra to principle)

Sinking for specific eventualities:
car repairs  40
car insurance  75
vet bills  25
vehicle registration  5
eventual car replacement  20
eventual electronic goods replacement 10
Down payment fund  100



Assets**: 27k
~10k in checking, though all the dollars have been divvied to future expenses/purposes like tuition and books, car repairs, car insurance, etc
10k emergency fund in basic savings account at my bank
6.5k in an online savings account for future home down payment-- we hope to buy in 1.5-2 years, when my partner has graduated and gotten a career job

Liabilities: 9.2K total in federal student loans @ about 6%
               CC is paid in full each month and always has been, both cars bought used and paid in full

Specific Question(s): We're not doing poorly, but I can't shake the feeling that we could be doing better, smarter, while still having creature comforts and human luxuries. I grew up low income and on public assistance, to people who grew up the same way and I always considered "well off" to be having enough money to pay all your bills in the same month and still be able to eat and dress. I learned everything I know about money from the internet, so I've been furiously googling for a few weeks now, and that's how I came across this forum. Lurked for a couple days, and made an account this evening. Hoping I can get a face punch or two to help me see if I'm just oblivious to something.




*Our fuel expense is pretty high because I have a big commute. We live only 2 or 3 miles from both where my partner works and attends classes. Commuting 4 days a week for me makes more sense than 6 or 7 for my partner. Plus, rent here is half of similar rent in the city I work in. I won't move jobs, because I have a good, stable job in my chosen field. One I like enough that even if I didn't plan to retire early, I could do this happily until I'm 69. There are no jobs to speak of in my chosen speciality where we currently live.

**We also each have retirement savings account (through employer), to which we contribute a portion of our gross pay, enough to get full employer matches. In 2015, I will have the opportunity to contribute to a Roth (also via employer, no match) in addition to my traditional account, and I intend to contribute the full 5,500. These account balances aren't listed here.

[Gin1984]

Just FYI, you can't contribute to both a traditional and Roth IRA.
So I am a bit confused, your partner is the one in school right?  Are the student loans yours or your partners?  Are you legally married or no (changes things for taxes)?  Are you in a state where 529 are deductible?
Phones look a bit high, you should be able to do something about that when if your contract expires.  Otherwise the only other thing that pops out is why is part of your EF in a basic bank account?  Put it in the high yield one.

[Exflyboy]

Yeah phones are high.. That could be $5 or $10 a month each... unless your addicted to data on the go smartphone stupidity.

Piss money?.. well thats a personal choice of course.

Any extra you can free up you can throw at your school loans (you don't mention the APR your paying on them?)

Frank

[Elliot]

Just FYI, you can't contribute to both a traditional and Roth IRA.
So I am a bit confused, your partner is the one in school right?  Are the student loans yours or your partners?  Are you legally married or no (changes things for taxes)?  Are you in a state where 529 are deductible?
Phones look a bit high, you should be able to do something about that when if your contract expires.  Otherwise the only other thing that pops out is why is part of your EF in a basic bank account?  Put it in the high yield one.

-That is the intent in 2015. The Roth money will be coming from the promotion I received recently, for which the salary increase was conveniently 5k.
-partner in school, student loans mine for my bachelors. Legally wed. No idea about 529. I never looked into them as I had assumed they were only for children and future tuition.
-phones not under contract anymore. Compared them with Ting a few months ago, and it would only save about 6 dollars a month for us, which to me is worth it as I get good customer service with my current provider.
-The interest rates aren't all that different, only about 0.3%. Main difference is ease of accessibility. Recs for an account that would give more than 1% without risking principal?

Yeah phones are high.. That could be $5 or $10 a month each... unless your addicted to data on the go smartphone stupidity.

Piss money?.. well thats a personal choice of course.

Any extra you can free up you can throw at your school loans (you don't mention the APR your paying on them?)

Frank

We only have wifi at home, not at work, so we need a data plan for navigation, accessing references, etc.

I did, 6%

[Gin1984]

Just FYI, you can't contribute to both a traditional and Roth IRA.
So I am a bit confused, your partner is the one in school right?  Are the student loans yours or your partners?  Are you legally married or no (changes things for taxes)?  Are you in a state where 529 are deductible?
Phones look a bit high, you should be able to do something about that when if your contract expires.  Otherwise the only other thing that pops out is why is part of your EF in a basic bank account?  Put it in the high yield one.

-That is the intent in 2015. The Roth money will be coming from the promotion I received recently, for which the salary increase was conveniently 5k.
-partner in school, student loans mine for my bachelors. Legally wed. No idea about 529. I never looked into them as I had assumed they were only for children and future tuition.
-phones not under contract anymore. Compared them with Ting a few months ago, and it would only save about 6 dollars a month for us, which to me is worth it as I get good customer service with my current provider.
-The interest rates aren't all that different, only about 0.3%. Main difference is ease of accessibility. Recs for an account that would give more than 1% without risking principal?

Yeah phones are high.. That could be $5 or $10 a month each... unless your addicted to data on the go smartphone stupidity.

Piss money?.. well thats a personal choice of course.

Any extra you can free up you can throw at your school loans (you don't mention the APR your paying on them?)

Frank

We only have wifi at home, not at work, so we need a data plan for navigation, accessing references, etc.

I did, 6%

Nope, they can used for your partner's living expenses, up to the amount his/her college says living expenses should cost.  My state allows for me to deduct $5000/person so because I am married I can deduct $10,000 and my school allows me to use $1000/month so basically money in, money out, lol.
And are you maxing out on any retirement vehicles through your employer?  That may make more sense than a Roth at your current income.

[Elliot]

Nope, they can used for your partner's living expenses, up to the amount his/her college says living expenses should cost.  My state allows for me to deduct $5000/person so because I am married I can deduct $10,000 and my school allows me to use $1000/month so basically money in, money out, lol.
And are you maxing out on any retirement vehicles through your employer?  That may make more sense than a Roth at your current income.

All my retirement vehicles are through my employer, including the Roth. In the traditional, I only contribute 5% which is matched equally by my employer. Any further traditional contributions would unmatched. Should take the money I'm putting in a Roth and put it into my traditional instead, even sans match?

Does it make sense to do 529 now, when my partner only has two more semesters in school, or have I pretty much missed the boat on that?

[Gin1984]

Nope, they can used for your partner's living expenses, up to the amount his/her college says living expenses should cost.  My state allows for me to deduct $5000/person so because I am married I can deduct $10,000 and my school allows me to use $1000/month so basically money in, money out, lol.
And are you maxing out on any retirement vehicles through your employer?  That may make more sense than a Roth at your current income.

All my retirement vehicles are through my employer, including the Roth. In the traditional, I only contribute 5% which is matched equally by my employer. Any further traditional contributions would unmatched. Should take the money I'm putting in a Roth and put it into my traditional instead, even sans match?

Does it make sense to do 529 now, when my partner only has two more semesters in school, or have I pretty much missed the boat on that?

So couple things, excepting a SIMPLE IRA, IRAs are not run by your employer.  Do you have a 401k, 457, 403b?  Those have a much larger cap than an IRA, of either variety.  And, two more semesters is still a year and personally I'd save money I could, even if it was a small amount and for us, it is not (about $500 for 2015) What state are you in?
What is your top tax rate?  And are you in a state was income tax?

[Elliot]

Nope, they can used for your partner's living expenses, up to the amount his/her college says living expenses should cost.  My state allows for me to deduct $5000/person so because I am married I can deduct $10,000 and my school allows me to use $1000/month so basically money in, money out, lol.
And are you maxing out on any retirement vehicles through your employer?  That may make more sense than a Roth at your current income.

All my retirement vehicles are through my employer, including the Roth. In the traditional, I only contribute 5% which is matched equally by my employer. Any further traditional contributions would unmatched. Should take the money I'm putting in a Roth and put it into my traditional instead, even sans match?

Does it make sense to do 529 now, when my partner only has two more semesters in school, or have I pretty much missed the boat on that?

So couple things, excepting a SIMPLE IRA, IRAs are not run by your employer.  Do you have a 401k, 457, 403b?  Those have a much larger cap than an IRA, of either variety.  And, two more semesters is still a year and personally I'd save money I could, even if it was a small amount and for us, it is not (about $500 for 2015) What state are you in?
What is your top tax rate?  And are you in a state was income tax?

I'm in the TSP. Living in TN, which has no income tax. It looks like we'll be in the 25% tax bracket, unless the stars align and our deductions are enough to drop us down.

[Gin1984]

Nope, they can used for your partner's living expenses, up to the amount his/her college says living expenses should cost.  My state allows for me to deduct $5000/person so because I am married I can deduct $10,000 and my school allows me to use $1000/month so basically money in, money out, lol.
And are you maxing out on any retirement vehicles through your employer?  That may make more sense than a Roth at your current income.

All my retirement vehicles are through my employer, including the Roth. In the traditional, I only contribute 5% which is matched equally by my employer. Any further traditional contributions would unmatched. Should take the money I'm putting in a Roth and put it into my traditional instead, even sans match?

Does it make sense to do 529 now, when my partner only has two more semesters in school, or have I pretty much missed the boat on that?

So couple things, excepting a SIMPLE IRA, IRAs are not run by your employer.  Do you have a 401k, 457, 403b?  Those have a much larger cap than an IRA, of either variety.  And, two more semesters is still a year and personally I'd save money I could, even if it was a small amount and for us, it is not (about $500 for 2015) What state are you in?
What is your top tax rate?  And are you in a state was income tax?

I'm in the TSP. Living in TN, which has no income tax. It looks like we'll be in the 25% tax bracket, unless the stars align and our deductions are enough to drop us down.

So that is federal.  You may also have access to a 457, check.  If you are in the 25% bracket then no don't do a Roth.  And also you only get state tax deductions with states that have income tax so the 529 is not useful for you.

[Exflyboy]

Just FYI, you can't contribute to both a traditional and Roth IRA.
So I am a bit confused, your partner is the one in school right?  Are the student loans yours or your partners?  Are you legally married or no (changes things for taxes)?  Are you in a state where 529 are deductible?
Phones look a bit high, you should be able to do something about that when if your contract expires.  Otherwise the only other thing that pops out is why is part of your EF in a basic bank account?  Put it in the high yield one.

-That is the intent in 2015. The Roth money will be coming from the promotion I received recently, for which the salary increase was conveniently 5k.
-partner in school, student loans mine for my bachelors. Legally wed. No idea about 529. I never looked into them as I had assumed they were only for children and future tuition.
-phones not under contract anymore. Compared them with Ting a few months ago, and it would only save about 6 dollars a month for us, which to me is worth it as I get good customer service with my current provider.
-The interest rates aren't all that different, only about 0.3%. Main difference is ease of accessibility. Recs for an account that would give more than 1% without risking principal?

Yeah phones are high.. That could be $5 or $10 a month each... unless your addicted to data on the go smartphone stupidity.

Piss money?.. well thats a personal choice of course.

Any extra you can free up you can throw at your school loans (you don't mention the APR your paying on them?)

Frank

We only have wifi at home, not at work, so we need a data plan for navigation, accessing references, etc.

I did, 6%

Sorry, but you need wifi at work in order to do your job?.. then your employer needs to provide this.

Its hard for me to get to a place where data on the go is a real NEED.. I think if you examined it closely you'll find its really an expensive "WANT". We didn't even have data on our phones a few years back.. what's changed?.. Up to you of course.

Besides you can still get unlimited talk, text and 3G data for $25 a month on Republic wireless.

[Elliot]

Sorry, but you need wifi at work in order to do your job?.. then your employer needs to provide this.

Its hard for me to get to a place where data on the go is a real NEED.. I think if you examined it closely you'll find its really an expensive "WANT". We didn't even have data on our phones a few years back.. what's changed?.. Up to you of course.

Besides you can still get unlimited talk, text and 3G data for $25 a month on Republic wireless.

I don't have a traditional desk job, and often need to move between campuses during the day, but carrying a couple large medical references would be difficult at best. So it is purely convenience, one that I do choose, I guess. Republic unfortunately doesn't have coverage for me, but hopefully that changes in the future.

A few years back I was fetus, I guess, as I got my first phone at 19, first data when that phone bit the dust and I started this job at 21 :P

[Elliot]

Thank you both for the responses so far, by the way. I very much appreciate having fresh eyes on things, and the time it takes to reply.

[brooklynmoney]

You should be getting some sweet credits and tax deductions for your student loan interest and tuition I would think. I am far from an accountant but I would make sure to consider what's available to you at tax time.

[Elliot]

You should be getting some sweet credits and tax deductions for your student loan interest and tuition I would think. I am far from an accountant but I would make sure to consider what's available to you at tax time.

Last year our refund went to creating the e fund (I fleshed it out with a fuckton of overtime), and if we get one this year, the plan is to put it toward student my loans.

I was 24 when it dawned on me that there was something more to money than paying bills on time, and I wish it had happened sooner.

[mozar]

I had that moment when I turned 31. I think we all have that period of mourning when we realize what could have been.

[MDM]

I'm in the TSP. Living in TN, which has no income tax. It looks like we'll be in the 25% tax bracket, unless the stars align and our deductions are enough to drop us down.

Income: 71K yearly
             self- base pay 59k +overtime and holiday opportunities
             partner- ~12k, variable (part time, just above minimum wage retail job)

The stars are already aligned.

  71,000 Gross
- 12,400 Std. Deduction
-   7,900 Exemption
  ---------
 $50,700 Taxable Income.  This puts your firmly in the 15% bracket for MFJ, and that doesn't even account for credits, 401k deductions, student loan deductions, etc. 

You should check this with your own tax calculations, or try the spreadsheet here: http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/msg274228/#msg274228.  Make your choice of traditional vs. Roth an informed choice.

[Elliot]

I'm in the TSP. Living in TN, which has no income tax. It looks like we'll be in the 25% tax bracket, unless the stars align and our deductions are enough to drop us down.

Income: 71K yearly
             self- base pay 59k +overtime and holiday opportunities
             partner- ~12k, variable (part time, just above minimum wage retail job)

The stars are already aligned.

  71,000 Gross
- 12,400 Std. Deduction
-   7,900 Exemption
  ---------
 $50,700 Taxable Income.  This puts your firmly in the 15% bracket for MFJ, and that doesn't even account for credits, 401k deductions, student loan deductions, etc. 

You should check this with your own tax calculations, or try the spreadsheet here: http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/msg274228/#msg274228.  Make your choice of traditional vs. Roth an informed choice.

you are a gentleperson and a scholar.

[Apples]

Elliot I did the same thing you did at first- assumed my gross income was my taxable income, even though I  knew there was something about deductions and exemptions and "what not" in my mind.  And don't forget you can also subtract student loan interest you've paid this year, up to $2500.  Which we met this year (ugh) but next year will be well under (woohoo!).  I think you two are doing fairly well, given that you're also balancing school and work and figuring out next steps together.

[Elliot]

Thanks, Apple. Perhaps one of my New Year's resolutions should be to gain a better understanding of taxes!

[Icecreamarsenal]

I had that moment when I turned 31. I think we all have that period of mourning when we realize what could have been.

Period to pangs. I still feel it occasionally, 2 years later.

[Elliot]

An update for 2016. Major vet emergency, moving fiasco that meant we replaced our couch and love seat, our laptop went finally kaput, and the washer and dryer both reached the end of their natural life (RIP).


Income: 86K yearly
             self- base pay 70k +overtime and holiday opportunities
             partner- ~16k, variable (part time, just above minimum wage retail job)
Current expenses:
Bills
Rent 1005
Phones 114
Electricity 80
Netflix 9
Hulu+ 8

Expenses of daily living
Groceries 250
Fuel 200
Household goods 20
HBA(haircuts/soap/shampoo/haircuts/cosmetics, etc) 20
Pet food/supplies 50

potential expenses of daily living
Medical (copays, tests, medicine, equipment): 150
Clothing 75
Travel 50
Gifts 30

discretionary piss money
Restaurants 30 (usually for my out of town dr appts)
Alcohol 40
Spending Money 100 (including hobbies, monthly "date" activities)


Sinking for specific eventualities:
car repairs  40
car insurance  80
vet bills  25
vehicle registration  7
eventual car replacement  100
eventual electronic goods replacement 10
Down payment fund  100



Assets**:
~10k in checking, though all the dollars have been divvied to future expenses/purposes like tuition and books, car repairs, car insurance, etc
10k emergency fund in basic savings account at my bank
15.5k in an online savings account for future home down payment

Liabilities: 9.2K total in federal student loans @ about 6% PAID IN FULL
               CC is paid in full each month and always has been, both cars bought used and paid in full


**We also each have retirement savings account (through employer), to which we contribute a portion of our gross pay, enough to get full employer matches.

[Gin1984]

Sorry I have not gotten back to you about the high interest accounts.  There are three that are often recommended.  I have two of the three.  Capital one 360 is the lowest interest rate at .75% but if you go through a referral code you get $20 if you deposit $250 and leave it there for three months, then there is sallie bank which offers .9%.  I like them because they are linked to my upromise account for online shopping and my savingstar account for online grocery coupons.  You get a 10% bonus every feburary for the money that goes in through upromise.  And then the highest interest rate Ally.com
The come with a 1% rate and free checks if needed (can be a very useful thing if you still use checks).  I know least about them because I am not changing banks for .25%, but I have heard great things about them.