Author Topic: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted  (Read 7008 times)

RumbleKittie

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Hello everyone!

I stumbled upon the MMM blog a couple weeks ago, and I've been devouring everything chronologically from the very first post. Right now I'm on September 12, 2011!

Introduction
I'm 29 and my husband is going to turn 37 in a couple weeks. We have no children yet, but we've been actively trying for a while. Meanwhile, we have two large dogs & two cats. Our only debt is our mortgage, which we recently refinanced to 15 years at 3%. We've been really passive/negligent about our finances, so we're lucky that we're in a stable position. I recently started getting more organized in figuring out where our money is and what our expenditures look like, because we were motivated to pay off our house as soon as possible. Now that I've been exposed to the idea of early retirement, I'm inspired to aggressively pursue that type of freedom. It would really be great to retire in 10 years. I'm trying to figure out if that's possible.

Income
My Income: $7,380/month Take-home
  • This is a monthly average from the last ten months. Every January, I get a bunch of bonuses that vary from year to year that are averaged into the above number.
  • This includes deductions for medical insurance ($76), dental insurance ($7), vision insurance ($9.52), taxes ($3,764.69), 401(k) ($769.04), & the company's employee stock purchase plan ($936.02)
  • For the 401(k), my company matches 100% for the first 6%. I'm participating at 6%.
  • For the employee stock purchase plan, we can contribute 10% of our salary to buy company stock. The company matches the employee contributions at a rate of 75%. Contributions are after tax (whatever that means), and I'm participating at 10%.
Husband's Income: $3,769/month Take-home
  • This includes deductions for medical insurance, dental insurance, taxes, & 401(k).
  • For the 401(k), his company matches 50% for the first 6%. He is participating at 11%.
Total Monthly Take-home Income: $11,149 average

Assets
  • Husband's 401(k): $75,078
  • My 401(k): $78,294
  • My Roth IRA: $25,247
  • My company's stock: $84,686
  • Cash sitting in checking/savings accounts: $54,397
Total Non-Property Assets: $317,702

Liabilities
  • Mortgage on our 2,610 sq ft home: $113,725 (15 year mortgage at 3%)
When we had our house appraised for the refinancing earlier this year, it was valued at about $200,000. The current Zillow estimate is $224,000.

Expenses
I only started tracking our spending a couple months ago. Since that means there are only 2 data points, it may not be representative of our typical spending. It's also difficult for me to ascertain our typical spending, because we had some major expenditures that are irregular. For example, we expanded our patio and built a pergola, replaced the carpet with hardwoods, took an international vacation where I was bitten by a monkey which resulted in large medical expenditures outside of insurance, etc. Obviously, we're not going to replace our flooring or get bitten by monkeys every year, so I'm not sure how to factor that in.

Mortgage/Escrow: $1,339/month (Includes principal, interest, property tax, and home insurance)
HOA: $20/month average
Household Goods: $32 avg of last 2 months (Includes things like paper towels, cleaning products, mops, laundry detergent, etc.)
Gas: $318 avg for last 2 months (I live 7 miles from work, but my husband lives 35 miles from work. He's tried from day 1 of this job to find another job closer to our house with no luck. Also, our friends and his family live all over the DFW metroplex.)
Tolls: $80 avg for last 2 months
Groceries: $309 avg for last 2 months
Restaurants: $187 avg for last 2 months (Our food expenditure is ridiculous now that I look at it, especially considering that my company provides breakfast and lunch Mon-Thur for employees. This means that we're paying this kind of money just for my husbands meals and my dinners/weekend meals.)
Electricity: $275 avg for last 3 months (Our electricity bill can get as high as $350 during summer months and as low as $15 during winter. We live in TX.)
Natural Gas: $25 avg for last 2 months
City Utilities: $197 avg for last 3 months (This includes trash pickup, recycling, sewage, & water.)
Phone: $90/month
Internet: $75.21/month
Netflix: $9/month
Car Insurance: $253/month
Clothing: $162 avg for last 2 months (My husband bought a bunch of clothes for our vacation. I'm not sure what our typical clothing expenditure is like.)
Haircuts: $60/month (My husband gets 2 haircuts a month that cost $24 each. I get 1 haircut every 6 months at $72 each.)
Toiletries: $19/month avg for last 2 months (This includes things like shampoo/conditioner, soap, toothpaste, deodorant, makeup, etc.)
Pet Related Expenses: $529 avg for last 2 months (This includes $35/mo insurance for the dogs, other vet related expenses, food, medication, cat litter, etc. I don't think this is typical, I bought another litter box & one of our dogs got hurt in this time frame.)
Entertainment: $112 avg for last 2 months

Some of our expenses like food & gas went up this year relative to previous years, because my father & his wife were staying with us for 9 months. He needed support while handling health issues. He's back home now. I anticipate that this will be something I should budget for in the future, but I won't know when he'll need this level of assistance again.

I didn't include travel related expenses, but we budget about $10k a year for traveling. I have family all over the world, and he has family all over the country. Also, experiencing other cultures is a passion of mine.

Other major expenses in the near future will include my husband's college education, because he is motivated to go back to school to get a degree. We believe this will help him apply his skills in other industries, so that he can have more flexibility in finding jobs (and not have a killer commute every day.)

Challenges in becoming a Mustachian
Cars:
We have a 2006 Nissan Altima that I bought before we started dating. We also have a 2011 Ford F150 and a 2008 Dodge Challenger. These are my husband's cars. I'm a woman and cannot understand the fascination with vehicles, but these cars seem to be meaningful to him (particularly the Challenger). He has nicknames for his cars. I sometimes find him sitting in the garage simply enjoying the sight of his car. I could care less about cars, in general, but I want to be sensitive to his passions. We could easily get rid of the Challenger, since it sits in the garage 90% of the time. However, I don't want to invite divorce, especially since all the cars are paid off. It was a major step when I convinced him to drive my Nissan for his commute, instead of driving the truck. I drive the truck now to work, but I'm looking into bikes.

Getting on the Same Page:
On a similar note, my husband is generally less disciplined with spending than I am (and I have been rather relaxed). Whenever we talk about the future, I feel as though we have the same values, but it's been a challenge to get him to commit to achieving our goals in practice. When we go out to eat with family or friends, I'll suggest we share (knowing the typical portion sizes at American restaurants), and he'll agree ..... but then he'll order extra appetizers and sides to make-up for the perceived food losses. When we're out of something in the household, he'll drive to the grocery store or Wal-mart to get that one item instead of just adding it to our shopping list and waiting a few days until I do our weekly shopping. Instead of filling up on the way home (or trusting me to fill up on the way home), he'll come home, relax for a while, and then drive each vehicle separately to the gas station to fill up. This drives me crazy, but whenever I bring them up, he feels I'm nagging him about trivial little things. I'm not going to even go into the casual purchases, because I decided to just deal with that with siphoning some personal spending money to each of us ($100/mo each).

I have similar issues when trying to maintain relationships with my friends & colleagues, who enjoy dining at the best restaurants & socializing over cocktails. Fundamentally, I'm having a challenge preserving connections with people who have different financial values. I feel that my suggestions for alternate activities that are more frugal are met with disinterest and that I am perceived as a cheapskate. They're great people, and I want to keep them in my life. However, they don't derive the same pleasure from simple things as I do.

Conclusions
In addition to any insight into working the numbers/budget for early retirement, I'd appreciate advice on how to live a full, Mustachian lifestyle without alienating anyone. I'm really happy I found this community and am excited to hear everyone's advice (even if it includes a few face punches!).





skyler

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #1 on: November 08, 2013, 06:53:35 AM »
RumbleKittie,

You are in a great position: young, awesome income, no debt and you found the blog. Congrats!
 
The fact that you are being mindful about spending will help enormously with future savings/investments.

Do you subscribe to MINT?
I found that the budgets/monthly "trends" pie charts are such a great visual tool for tracking expenses and seeing where money is really going. I casually share the monthly stats with my DH and at least now he knows what our total spending for the month was (we never had a budget before I found MMM) and neither one of us really knew where the money was going...
I am dealing somewhat with a similar situation in regards to my DH. He is not as mustacian as me. Over the last few months I went from feeling anger (not being on the same page), to a bit more accepting and relaxed attitude.
I started checking out 3-4 financial books from library at a time (see MMM book recommendation page), so now my DH is seeing that I am really interested in the finances and am trying to educate myself. I feel he is a bit more receptive to what I have to say and tries to stick to his monthly allowance of fun money.

I am struggling with the fact that we as a couple could be so much more effective in saving together. Alas, some are luckier than others...
What helps me is that I try to think about all the good things we share as a couple. I accepted that my priorities are a bit different. I am optimistic that our situation will improve. My DH loves his job and does not subscribe to the same ERE goals, so I respect that.
Recently, we found out a friend of ours has a secrete gambling problem. His wife was devastated at the news. So try to think about the good things, it could be worse: gambling, alcoholism, infidelity.

As far as the friends--that's a tough one. We have young kids that restrict our free time anyway. We used to do a lot more going out and socializing before the younglings came along. Having both my and his family close by helps us in terms of socialization these days.
I feel it's important to continue to socialize and keep your connections (if they are truly important to you).
Set up a monthly allowance for entertainment and take comfort in knowing that you have budgeted for it.
Over time, perhaps your DH will warm up and it will get easier. All the best to you!

RumbleKittie

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #2 on: November 08, 2013, 07:27:23 AM »
Thanks for the input, skyler! I'll check out Mint right away! Currently, I'm using YNAB to track my expenditures and budget going forward from when I started a couple months ago, and haven't really done a post-mortem on our spending.

It sounds like we're dealing with many of the same challenges! I probably came off as a bit more resentful than I meant about my husband's non-Mustachian habits. What I left out is that many of the things he does or buys is usually for me. He's very thoughtful in that way. I think buying gifts is his "love language", and it's been a challenge for me to reassure him that I really don't need anything but memories.

You perfectly encapsulated how I feel when you stated that you are "struggling with the fact that we as a couple could be so much more effective in saving together". Considering our current income, I feel we should be further along. However, I'm the one that's essentially in charge of our finances, and I'm totally clueless. For example, a lot of our assets are tied up in our 401(k)'s and Roth IRA, so does that mean I can't touch it without great penalty until I'm a certain age? I would think that'd be an undesirable situation if I wanted to retire at 40. Also, I have a ton of stock in one company (the one I work for). I think that's probably bad, but I have little confidence in my own decision to sell the stock for a more diversified portfolio. I guess all I need there is a little reassurance, and then I can invest some time in figuring out the mechanics of actually doing that. Fundamentally, even if we got our savings ratio up, I'm not sure how to effectively put that money to work or how to evaluate their performance.

For now, I'm trying to improve on things I actually can understand, like reducing our expenditures. I put together a budget going forward that would be $50k/yr expenditure. I know that's embarrassingly high compared to a lot of you expert Mustachians. In order to gradually ease my husband into this lifestyle, I was going to start there and gradually reduce in the future ..... maybe $40k/yr budget next year and so on.

This is the first draft of the monthly budget so far:

Mortgage/escrow: $1,339
Maintenance/Improvements: $223
HOA: $20
Furniture: $100 (We have a few unfurnished rooms.)
Household Goods: $19
Gas: $300
Tolls: $80
Vehicle Maintenance: $50
Registration/Inspection/Taxes: $10
Car Replacement: $310 (Saving up in case we need to replace the Nissan in 5 years.)
Groceries: $200
Restaurants: $200
Electricity: $122
Natural Gas: $37
City Utilities: $122
Phone: $90
Internet: $75
Netflix: $9
Car Insurance: $253
Disability Insurance: $99
Medical: $250
Hubby Clothing: $50
My Clothing: $50
Toiletries: $19
College: $50 (Probably not enough to cover his expenses even at a community college, but was going to funnel unspent money from other categories here.)
Gifts: $38
Pet-Related: $143
Hubby Spending Money: $100
My Spending Money: $100
Entertainment: $100
Vacation/Travel: $350

Thanks again!

oldtoyota

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #3 on: November 08, 2013, 07:33:47 AM »
The stock in your company concerns me. I can't help but think of Enron when someone says that.

If you don't know a lot, then a Vanguard Target Retirement Fund might be up your alley. They automatically adjust the asset allocation as you get closer to retirement, and I have found their fees lower than at other institutions.

If you look up the Jim Collins blog, he has some good articles about how he divided his investments between a few Vanguard funds to get a portfolio with good asset allocation.

http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/


Iron Mike Sharpe

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #4 on: November 08, 2013, 07:45:04 AM »
What tax bracket are you two in?  Is it 25% or 28%?  I guess that really doesn't matter, but at that high of a tax bracket, you both need to be sending the full $17,500 to your 401Ks each year.  Max it out.    You need to take advantage of your tax advantaged accounts to the fullest.  If you are in a HDHP with an HSA, max the HSA out too. And max the Roth IRA out as well.

I see you mention early retirement.  To retire early, you need access to assets you can draw money from before you turn 59.5 and can access the 401K and Roth.  All I see is your comapny's stock.  This is very risky.  You are not diversified at all in your taxable investments.  Do you have an asset allocation plan?  If not, I would start researching those.  Head over to the Bogleheads website or get the Bogleheads Guide to Investing from the library.  Figure out what your overall strategy is.  Are you going to own rental property at all? 

You have the higher income in the family.  It seems very risky to have your family's main source of income AND 100% of your taxable investments all tied to the success/failure of the company you work for.  Yes, you are getting matching funds, but that is a huge risk.  I'd drop down to just 1% to the stock purchase plan and move the other 9% to purchasing low cost index funds that fit your asset allocation plan. 

You also have a huge chunk of cash sitting around doing nothing.  Keep 6 months oof expenses worth for an emergency fund.  Invest the rest into low cost index funds. 

bogart

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #5 on: November 08, 2013, 07:49:54 AM »
We have no children yet, but we've been actively trying for a while.

Many, many years ago I was somewhat similarly situated (not entirely, as my DH had had a vasectomy in a prior marriage.  Active trying without medical help wasn't an option).  I was also fresh out of grad school with a starter job, in a new marriage with two college-bound stepkids and a not-so-long-divorced-from-his-former-wife DH who was close to trying to rebuild from scratch after he and she had divided things up. 

If I could do one thing in my life over, I'd ignore the PF blogs/message boards I read back then that told me I should never take on debt and needed to save, save, save, and jump right into (taking on debt and) paying for the infertility treatments that we needed (of which we might well have needed fewer had we started when I was younger -- and I was your age when we wed, so ...).  It might, of course, not have made any difference (I eventually ended up a mom to one kid; I'd hoped for two.), but it might have saved us tens of thousands of dollars (and years of heartache, though I'm now at peace with where we've ended up). 

You may of course feel differently about this, though I can tell you I had no idea how strongly I wanted to have a child until I was told that I wouldn't be able to conceive one genetically related to me (this turned out to be inaccurate, but not far wrong, see above).  So I'm certainly not saying you should drop everything and run to the doctor.  But you should think carefully about how important this may be to you, and not delay pursuing diagnosis and (if necessary) treatment if you decide you want to do so.  If you'd like information about this, or to be pointed to online resources, please let me know.

fallstoclimb

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #6 on: November 08, 2013, 07:53:41 AM »
I think you're in great shape with that monthly income.  It would be worthwhile to add up your current monthly spending as a percentage of your monthly take home pay. 

Getting on the Same Page:
On a similar note, my husband is generally less disciplined with spending than I am (and I have been rather relaxed). Whenever we talk about the future, I feel as though we have the same values, but it's been a challenge to get him to commit to achieving our goals in practice. When we go out to eat with family or friends, I'll suggest we share (knowing the typical portion sizes at American restaurants), and he'll agree ..... but then he'll order extra appetizers and sides to make-up for the perceived food losses. When we're out of something in the household, he'll drive to the grocery store or Wal-mart to get that one item instead of just adding it to our shopping list and waiting a few days until I do our weekly shopping. Instead of filling up on the way home (or trusting me to fill up on the way home), he'll come home, relax for a while, and then drive each vehicle separately to the gas station to fill up. This drives me crazy, but whenever I bring them up, he feels I'm nagging him about trivial little things. I'm not going to even go into the casual purchases, because I decided to just deal with that with siphoning some personal spending money to each of us ($100/mo each).

I have similar issues when trying to maintain relationships with my friends & colleagues, who enjoy dining at the best restaurants & socializing over cocktails. Fundamentally, I'm having a challenge preserving connections with people who have different financial values. I feel that my suggestions for alternate activities that are more frugal are met with disinterest and that I am perceived as a cheapskate. They're great people, and I want to keep them in my life. However, they don't derive the same pleasure from simple things as I do.


My husband is also less disciplined with spending that I am (and like you, I am the main breadwinner).  The solution for me has been to pick my battles, and to realize that I do have my own problem areas that I either need to work on, or accept that we both are a little spendy in some areas that are worth it to us. 

You make a point that he orders too much when you go out to eat, but with your income I don't think a $200 restaurant budget is really that bad.  I'm sure you can talk him into waiting on running out to the store every time you run out of something (who likes going to the store anyway???), and if he prefers to go out and get gas rather than stop on his way home -- well, how much do you think that is really costing you?  Marital compromise is important and sometimes the best thing you can do is look the other way, especially when he probably thinks that he is 'taking care of you' by going out of his way to make sure the house is stocked and the cars have gas.  My dad would sometimes take my mom's car out to fill it after she got home at night, when she was rushing to get home to get dinner on the table and wouldn't want to stop on the way out the next morning.  Not mustachian, but it came from a place of love. 

I do think your car centric life/your husband's obsession with cars might affect your early retirement plans.  I don't understand why you are saving up to replace your Nissan when you have two other cars at home and seem interested in biking places.  If I were you I would try to talk the husband into trading in the F-150, especially since he isn't as emotionally attached to it. Driving such a gas guzzler is basically the antithesis of mustachianism/responsible world living.

I also struggle with having spendier friends (although the situation is mitigated as most are getting advanced degrees and therefore don't HAVE as much money to spend).  Do you split bills evenly or pay for your own way?  I would suggest trying to change the norm to everyone paying separately, and just order cheap -- house wine instead of cocktails, or an app for dinner instead of an expensive entree.  Or, you can suggest trying different ethnic restaurants (usually cheaper) rather than the usual fancy restaurants and bars you go to.  Haivng kids will probably nip this problem in the bud though :)

Sorry you got bit by a monkey!

MissStache

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #7 on: November 08, 2013, 09:36:40 AM »
First of all, you are the first person on this blog who has ever had the caveat of higher expenses as a result of a monkey bite, and it makes me love you.  That's just the best damn thing I have ever heard (though I can only imagine it was pretty traumatic at the time, and I don't want to sound like I'm not sympathetic!).  So kudos there :)

Second, y'all are doing awesome and the fact that you found this blog so young when you have such a high income is fantastic.   You have a lot of potential and not a lot of crazy expenses.  In fact, the only ones that really jump out at me are your pet expenses (I have 3 cats and feed them expensive hippie food and our budget is only $85-100/month) and your food expenses, but I'm sure with a little effort you can get those way down.

There are the cars, which I don't get either.  People are cray about their vehicles.  I think it is the conditioning that they are the ultimate status symbol.  I'll get to that in a moment.

Of course your travel expenses are really high, but I get you there.  We budget a significant portion of our income on travel because I love it, and since you aren't in debt I can't fault you for it.

You've already hit the nail on the head with your biggest issue, which is that you and hubby aren't on the same page.  There are a zillion threads about how to deal with a spouse who isn't on board, and my biggest frustration with the mustacian lifestyle is the same thing.  I have a S.O. who is totally on board with me in principle, but then he buys $70 woth of Hieronymus Bosch action figures that sit on a shelf and I have to walk out of the room so I don't yell at him.  I can't really give much advice on that since I haven't resolved it in my own world, but talking about it exhaustively has helped us.  At first he was resistant because he just thought it was impossible, but when I showed him the math and gave him a concrete idea of what we are working towards he finally got it and started making changes.

I think you're a lot like me.  I was sucked in day one and it was LETS MAKE ALL THE CHANGES when I got home that night.  He just took longer and is maybe not so fanatical as I am.  And, it takes practice if you don't have the drive behind you.  Some people save easier and budget easier and change easier.  Some people want their action figures (or cars, or booze, or travel) and it takes longer to come to the conclusion that FI is better than those things.

Welcome to the Forums, by the way!  Good luck!

Iron Mike Sharpe

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #8 on: November 08, 2013, 10:09:16 AM »
The thing I don't get is why your husband needs two $24 haircuts a month.  Not a lot of money in the big picture, but I'm a guy and I can go 6 weeks between haircuts. 

willn

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #9 on: November 08, 2013, 10:25:21 AM »
but then he'll order extra appetizers and sides to make-up for the perceived food losses. When we're out of something in the household, he'll drive to the grocery store or Wal-mart to get that one item instead of just adding it to our shopping list and waiting a few days until I do our weekly shopping. Instead of filling up on the way home (or trusting me to fill up on the way home), he'll come home, relax for a while, and then drive each vehicle separately to the gas station to fill up. This drives me crazy, but whenever I bring them up, he feels I'm nagging him about trivial little things. I'm not going to even go into the casual purchases, because I decided to just deal with that with siphoning some personal spending money to each of us ($100/mo each).

I think maybe the separate gas station trips aren't about gas. They are about getting out for some he-man time, away from the house.  I'd say he needs to own up to it, find a healthier and maybe more frugal way to get away, but he's just dicking around doing that.  Time to grow up, to put it bluntly. Not saying this is true but it could be possible you need to recognize he needs some alone time to be a caveman and help find him a better outlet.

It's possible early retirement just doesn't interest him. It isn't for everyone.  And that's fine, too. At your income levels, having a couple hundred or more in fun money is fine. It just isn't a massive part of your net worth or yearly income.   Yeah, if you are both on board with being intense ER converts then you both choose to optimize and save that 2 or 3K /year. But if you're on board and he isn't, you need to find a way to reconcile so that his world view is respected too.  If you can both find a dream goal to work toward he'll find making sacrifices easier.  Right now it sounds like the 'why' isn't worth changing his comfort level.

Quote
I have similar issues when trying to maintain relationships with my friends & colleagues, who enjoy dining at the best restaurants & socializing over cocktails. Fundamentally, I'm having a challenge preserving connections with people who have different financial values. I feel that my suggestions for alternate activities that are more frugal are met with disinterest and that I am perceived as a cheapskate. They're great people, and I want to keep them in my life. However, they don't derive the same pleasure from simple things as I do.

We had to deal with this too, and some relationships grow a little bit apart because we just didn't go out to eat and drink, or if we made dinners, we stuck to a modest budget, instead of blowing hundreds on wine and overpriced (albeit delicious) food.  Now its more like chili and bargain wines. We don't even miss the artisanal cheese much and when we do get it we appreciate it that much more. 

We found it easy to blow off the 'cheapskate' label because our friends saw us knock out lots of debt and came to understand and respect that we had a plan, even as they struggled to get their spending under control.  When you live in an expensive area as we do, and have 6 figure household income, there is a lot of social pressure to have stuff that's artisanal, artistic, expensive.  One friend asked how the debt reduction was going back when we were paying off some business debt, and when we mentioned paying down 28K in 9 months she immediately grilled us how and started getting a plan together for herself.  Some people are ready for better financial management, some for ER, some will never care I suppose.

dirbyVA

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #10 on: November 08, 2013, 10:37:52 AM »
One suggestion on the car front - maybe you could introduce him to the concept of hypermiling and shift his focus from the F150/Charger to modding a gen 1 Insight for 100mpg or something like that... 

randymarsh

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #11 on: November 08, 2013, 10:41:25 AM »
Do you receive a discount on company stock you buy? Can you sell it whenever or are there waiting periods?

If you can buy it at discount and then sell it soon after, it can be a good deal. I did this when I worked for Gap as a lowly cashier.

It's after-tax in that it's deducted from your paycheck after taxes have been calculated. This is the opposite of how your 401k is deducted. Let's say your gross salary is 100K. Your 401k contributions are taken out and then tax is figured. If you contribute 10K a year, then as far as the IRS is concerned you made 90K.

Tyler

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #12 on: November 08, 2013, 10:50:12 AM »
Getting on the Same Page:
When we're out of something in the household, he'll drive to the grocery store or Wal-mart to get that one item instead of just adding it to our shopping list and waiting a few days until I do our weekly shopping. Instead of filling up on the way home (or trusting me to fill up on the way home), he'll come home, relax for a while, and then drive each vehicle separately to the gas station to fill up. This drives me crazy, but whenever I bring them up, he feels I'm nagging him about trivial little things.

One small piece of unsolicited relationship advice: Focus on the larger issues and be careful of over-optimizing tasks for your spouse.  You're 100% correct that planning and grouping tasks ahead of time is more efficient, but it's OK to leave some buffer for personality differences.  What you don't want is your SO choosing to not do chores altogether for fear of being criticized for doing them wrong.  IMHO, pick your battles and focus on positive reinforcement -- you'll both be happier that way.

Bank

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #13 on: November 08, 2013, 10:50:42 AM »
You have the higher income in the family.  It seems very risky to have your family's main source of income AND 100% of your taxable investments all tied to the success/failure of the company you work for.  Yes, you are getting matching funds, but that is a huge risk.  I'd drop down to just 1% to the stock purchase plan and move the other 9% to purchasing low cost index funds that fit your asset allocation plan. 


It might also make sense to investigate how long you have to hold the company stock.  As thefinancialstudent pointed out, if you can sell relatively quickly, then buy the stock with the 75% match.  Then sell it and invest in other things.  The scary thing isn't that you're BUYING company stock but that you OWN so much of it.

In general, it seems you have three major issues:  tracking expenses, a non-mustachian spouse, and a lack of investment knowledge.  The first will come with time - you just need a bigger sample size than what you have to make reasonable budgets and decisions.  The second is going to take time and is somewhat beyond your control.  The third is something you can address RIGHT NOW, and as the financial person in the family you have full control over it.  See Jim Collins' blog (linked to above), Bogleheads, and MMM's reading list.  You are obviously a smart cookie.  You can annihilate this issue while waiting on the other two.

RumbleKittie

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #14 on: December 26, 2013, 09:55:58 AM »
Hihi! It's me again! Sorry I disappeared for a while! You guys had a lot of good advice & resources, and I was taking time to digest everything and take action as appropriate.

Responses to Previous Posters
  • @oldtoyota, @Iron_Mike_Sharpe, & @Bank: Thank you for the book & blog suggestions! I've read The Bogleheads' Guide to Investing, which was incredibly practical and easy to apply. The "jlcollinsnh" blog was also helpful. I've re-discovered the library and placed a couple books on minimizing taxes on hold that I'll pick up today. I still have a long ways to go on learning about investing, but it's not nearly as intimidating now. Previously, I was paralyzed into inaction by my ignorance. Now, I'm able to start forming a long-term plan.
  • @MissStache & @willnfor: Thanks for the advice on converting DH to frugal living mindset! I agree that he is just taking "longer to come to the conclusion that FI is better than" being an impulsive consumer. The most effective technique for getting him on board was to describe to him what a life after FI could potentially be like. Once he had that "dream goal to work toward", he was much more motivated to be mindful of what we were spending money on. He's also increasingly more involved with the budget and tracking finances. I use YNAB for budgeting, and he can check on his phone how much is remaining in each defined category before making purchases.
  • @bogart: Thank you for your perspective on fertility! I've been to the doctor a few times, and as far as they can tell, there's nothing impeding my ability to conceive. I've brought up to DH that perhaps he should go to the doctor, as well, but he hasn't really felt any urgency on the matter yet. His sister has had to undergo IVF for her two children, which has provided several opportunities for us to discuss what we would do in a similar situation. For us, we probably wouldn't go down that road. We'd really love the opportunity to raise a child, but if it doesn't happen, we feel confident we could still live full, satisfying lives without children.
  • @thefinancialstudent & @Bank: I get a match of 75% of the company stock I buy, and I can buy up to 10% of my salary. Most of the return is from the match, rather than growth from the stock. The only constraint is that I must hold it for a year before I sell it. My current plan is to sell all the stock I can at the moment to re-invest in index funds (or maybe ETF's once I understand it), and then continue selling the company stock once I've held it for the mandatory year.

Some Other Actions Taken:
  • I opened a Vanguard account, and transferred my Roth IRA to a Vanguard Target Retirement Fund. I'm working on the whole company stock situation, as well. It's in progress.
  • I ran several scenarios (based on my current unsophisticated understanding) through FIRECalc & the Flexible Retirement Planner and feel confident that I could realistically be FI in 10 years.
  • My husband and I bought bikes. Both were good finds on Craigslist. I didn't necessarily want a road bike. However, it's difficult to find a bike frame small enough for me, and DH is doing the MS150 bike ride, so it'd be nice to be able to ride with him on some of his training rides.
  • We got a rewards credit card. I have never had a credit card before, but I know we wouldn't ever carry a balance. The idea is to subsidize our travel budget from the rewards we rack up.
  • It's kind of a small thing, but I was able to find a cheaper internet provider. Each month, I'm going to focus on similarly reducing each budget category.

More Questions!
  • I was hoping to find resources for understanding ETF's with the same level of clarity as The Bogleheads' Guide to Investing. Some people seem to prefer ETF's to index funds, and I'd like to understand the differences between the two.
  • I'm considering maxing out my retirement accounts to lower taxes. However, I'm worried about accessing the money before I'm 59.5, since my intention is to retire when I'm 40. I've heard about some sort of pipeline to work around this, but I would appreciate any resources that clearly detail what is involved with the process.
  • We have not been able to contribute to a Roth IRA the last couple years, because we exceed the maximum income limit. What are some other options available to us?
  • Our pet category is out. of. control. Let's consider our dog food costs alone. Our dogs go through a 26 lb bag of Blue Buffalo dry food in a little less than a week. At around $60 a bag, that is $240 on just dog food! Now, I know there's not a lot of sympathy about pet expenses in the FI community, but our animals are very much an important part of our family. Are there any other pet owners out there with suggestions on decreasing the cost for dog food without compromising quality?
Thanks again for all the advice so far! It has been very helpful!

ZsMom

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #15 on: December 26, 2013, 10:09:51 AM »
Love your story.  You are young and have good income - such a great place to be.  And I second the travel priority - this is definitely a priority for us to spend money on.  Have been to several different countries over the last 10 years (my husband and I are 31) and it's been amazing.  Great job with the travel rewards card for subsidizing your expenses.  Now get a frequent flyer # for the major carriers you use - we've gotten several free tickets this way too!

Pet food - consider the Nature's Domain pet food from Costco.  Grain free salmon and sweet potato. We have our dog and cat on this.  Reasonably priced quality food. 

Also regarding your child situation - consider that if/when you have children you might not want to work FT, or even at all anymore.  I know it sounds crazy - I thought so before my daughter was born.  But then I quit my job:) Just something to consider/plan for with all of your extra $.

starbuck

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #16 on: December 26, 2013, 10:28:36 AM »
Pet food - consider the Nature's Domain pet food from Costco.  Grain free salmon and sweet potato. We have our dog and cat on this.  Reasonably priced quality food. 

Also make sure you're feeding your pets the appropriate amounts of food. Go based off body condition and activity levels, not what it says on the back of the bag. Thankfully our dog maintains great body condition while being free fed. The cat... not so much. I was feeding our cat based off the manufacturer guidelines, and when he went for his vet appt he was approaching the obesity side of the weight scale for his size! I ended up cutting his food in HALF (in increments over the last few months) and he's lost several pounds and is much closer to where he should be. I also measure it out with a measuring cup. (We do this at the animal shelter I work at too.)

And I wouldn't bother with treats unless you're training. Affection is often enough of a reward. With dogs that are really food motiviated, you can use kibble for training so they aren't eating unnecessary calories. (YMMV though, it depends on the dog!)

Big dogs are ALWAYS going to cost more than smaller ones because they require more calories and larger doses of medication because of their size. So there's only so much you can do for this while the dog is under your care. Big dogs are awesome!... but expensive. :)

Eric

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #17 on: December 27, 2013, 12:23:02 AM »
More Questions!
  • I was hoping to find resources for understanding ETF's with the same level of clarity as The Bogleheads' Guide to Investing. Some people seem to prefer ETF's to index funds, and I'd like to understand the differences between the two.
  • I'm considering maxing out my retirement accounts to lower taxes. However, I'm worried about accessing the money before I'm 59.5, since my intention is to retire when I'm 40. I've heard about some sort of pipeline to work around this, but I would appreciate any resources that clearly detail what is involved with the process.
  • We have not been able to contribute to a Roth IRA the last couple years, because we exceed the maximum income limit. What are some other options available to us?

1.  In theory EFTs and index funds can be different, but in practice, almost all EFTs track an index and are therefore index funds.  For example, SPY is an EFT that tracks the S&P 500 index.
http://en.wikipedia.org/wiki/Exchange-traded_fund

2.  Search for "Roth Pipeline" and you'll find numerous posts.  I like this one, where iamlindoro breaks it down very simply.
www.mrmoneymustache.com/forum/investor-alley/how-to-collect-profits-from-index-funds/

3.  You can still invest no matter your income with a good old fashion brokerage account.  While not tax advantaged, there's also no restrictions on withdrawals.

chasesfish

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #18 on: December 27, 2013, 05:02:40 AM »
Welcome!

There's lots of things you can do, but #1 is to set the deferral percentages on your 401k tomorrow to max them out at $17,500 per year.   Do it immediately because your probably in a 25 or 28% tax bracket.

electriceagle

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #19 on: December 27, 2013, 06:56:46 AM »
Wow, you're doing a great job!

At your income level, taxes are your greatest expense. I'm going ro echo the others in suggesting that you stuff it with cash until it can't take anymore. I'd also suggest that you look tlat your annual medical expenses and see if an HSA based plan makes sense for you.

Don't worry too much about getting money out of them before arthritis sets in: there are lots of ways to get money out without penalty, or with minimal penalty, once your income is low. Once you leave your job, you can convert your 401k into an IRA and slowly convert it to roth whenever your income is low. Money in a Roth can often be taken out without penalty after 5 years. There are lots of other exceptions, such as buying a house, insurance ehile unemployed, etc.

Your 75% return investment plan is outstanding. Keep up the match, but look into your contract and see if what happens if you lose your job while the clock is still ticking on the year. If you keep the stock, check the program contract and see if you are allowed to hedge the stock in another account; if allowed, writing covered calls against it could reduce your risk considerably. Of course, it will limit possible reward as well. Presumably, you have subject matter expertise in your field. If you know enough to gauge your company's performance well, you may want to apply that knowledge (in a non-insider-trading way).

Finally, getting your partner on the same page can be tricky. As someone suggested, he may go driving around in his cars for some alone time. Does he have a man-cave? Do you have space for one? 

Also, you make more than your husband, which can be tricky for some guys, and may be part of the reason for the gifts. You can defuse this tension by reminding him that he is a sex god. If you both want to have a baby, that could be 2 with one stone.

RumbleKittie

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Re: Reader Case Study - Beginner Mustachian & Dealing with the Un-Converted
« Reply #20 on: December 27, 2013, 08:29:43 AM »
The momentum is really starting to build! Thanks guys!

@chasesfish & electriceagle: I decided to go ahead and increase my 401(k) contribution so that it'll approach the max $17,500, and I encouraged DH to do the same! The Roth pipeline seems fairly straightforward. However, how do people usually keep track of which batches have 'fermented' and are safe to withdraw without penalty? Do most of you just keep up with it in a spreadsheet?

As far as the dog food, we actually realized this week that we had been underfeeding our dogs. :-( (Not intentionally!) I've delegated the reduction of pet expenses to my husband. I sent him the tip about the Costco dog food, though! We don't currently have a Costco membership, but we were considering if it would be worth it for us. The savings on dog food alone could easily offset the yearly membership, though.

In regards to the EFT's, my shallow understanding gives me the impression that the main benefit of the EFT's are the flexibility? If my strategy is to hold and if EFT's track closely with index funds anyway, it seems that I might still be better off with sticking to index funds?

You guys might be on track with the alone time hypothesis regarding my husband's habit with the cars. He uses our media room as his "man cave". He's been up there a lot more recently, and it seems like the more time he spends in the "man cave", the less time he spends driving the cars around unnecessarily. I figure that he shifted the way he satisfies his need for time to himself.

I'm really impressed with how welcoming and helpful this community is with newbies like myself. You stumble around the internet enough, and you realize that this type of forum culture is sadly not the norm. Thanks, everyone!