The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: FrugalSpendthrift on May 20, 2014, 06:41:41 PM
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About us: Age 35, Spouse 31, Baby 16 months and another baby on the way
Income Monthly
Me - $11,160 Gross
Spouse - $900 Gross
Baby - $0
Mileage Reimbursement - $150
After taxes, 401k max, 100% of spouse income to 403b, fully funding two roth iras,
Total net income is about $ 5,775
Current expenses:
Fixed Monthly Spending
- Mortgage - 1,987 (Principal 895, Interest 567, Escrow 525)
- Cell Phone 55
- Internet 45
- Auto Insurance 78
- Crossfit - 120
Variable Monthly Spending Average
- Groceries 395
- Restaurants & Bars 90
- Pets 150
- Electric & Natural Gas 200
- Fuel for vehicles 220
- Entertainment 560
- Home Improvement 460
- Dentist & Pharmacy 88
- Travel 160
- Clothing 69
- Target 40
- Cash - 400
Total: $ 5,117
Expected ER expenses: Dont know yet.
Assets:
- House - $ 176,000
- 401k - $ 119,500
- Roth 401k - $ 68,500
- Roth IRA - $ 90,000
- Spouse 403B - $ 7,500
- Spouse Roth IRA - $ 59,000
- Spouse Trad IRA - $ 35,700
- Daughters 529 - $ 3,000
- Brokerage - $ 15,000
- Savings - $ 21,000
- Checking - $ 5,000
Subtotals:
Roth accounts 217,500
Tax Deferred 162,700
Current 41,000
Liquid Asset Total: $ 421,200
Liabilities:
- Mortgage - $ 174,700, 3.875%, 13 years remaining
- No other debt
Asset allocation is very simple, all of the retirement accounts are in a target 2045 index, and my brokerage account is an S&P 500 index.
Our spending has risen with our income and it peaked about two years ago. At the time I had five vehicles and an auto racing habit. When we discovered my wife was pregnant, I started making some changes.
Things I have done recently to optimize my finances:
- Refinanced the mortgage from a 30 year to a 15 year
- Got rid of three vehicles and two auto loans. We still have a 2014 Jetta Wagon and 2013 Hyundai Elantra, owned free and clear. Wife does home care nursing with a mileage reimbursement. My commute is only 4 miles, but I occasionally have to drive for work. I thought about trading down, but I'm fairly comfortable with this at the moment.
- Lowered home insurance and had the bank lower my escrow payment
- Lowered auto insurance
- Rolled spouse's old 401k into Vanguard IRA
- Changed 401k contributions from Roth back to Traditional
- Adjusted tax withholding to minimize my refund
- Consolidated my retirement investments into target funds
- Analyzed my electric usage and cut it drastically
- Started automatic contributions to a regular brokerage account
We have about 30% of each paycheck going to tax advantaged accounts and about 9% going to the brokerage account. Im looking to reduce some expenses and bump up my brokerage contribution. Areas that need work are how I blow through cash and what I spend on entertainment. Most of the entertainment category has been shooting sports lately, but I'm cutting back a little. No cable TV. Unfortunately my home improvement category keeps going up. Last month I had to replace my washing machine and yesterday my range had a little electrical meltdown. I'm currently looking for a replacement range. I resisted buying a new lawn mower, found a local guy to fix it and bartered with him, so it wouldn't cost me anything.
Vague Question:
What next?
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The entertainment category is eyebrow raising. Are you really blowing 10% of your take-home pay out the barrel of a gun?
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The entertainment category is eyebrow raising. Are you really blowing 10% of your take-home pay out the barrel of a gun?
Plus an additional $400/mo that disappears to "cash."
That's almost $1k/mo. Optimizing that is nothing to sneeze at. If I was in your shoes step 1 would be to list out where this $1k is really going each month.
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The entertainment category is eyebrow raising. Are you really blowing 10% of your take-home pay out the barrel of a gun?
5% and yes, that was my average for the last 6 months. A lot of that was a membership fee and a stockpile, so the cost for the next few months will be minimal.
The entertainment category is eyebrow raising. Are you really blowing 10% of your take-home pay out the barrel of a gun?
Plus an additional $400/mo that disappears to "cash."
That's almost $1k/mo. Optimizing that is nothing to sneeze at. If I was in your shoes step 1 would be to list out where this $1k is really going each month.
I think I'm just going to stop pulling big sums from the ATM, so everything gets tracked in mint. I have a feeling that when my wallet is full, the money flows out without as much concern.
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When I stopped withdrawing cash, it worked a treat. I used to take out $80 at a time (the bank had even saved this as my favourite withdrawal, so I could access this amount at the touch of a button!). I'd spend it over the course of a week on pointless things like a coffee and/or bacon sandwich before work, maybe a beer or two afterwards. It didn't take long to burn through $300+ in a month.
DW took maternity leave last October, then I discovered MMM in January and decided things had to change. At first I dropped the amount to $20 each time I visited the ATM, as I liked to keep something on me 'just in case'. This worked up to a point - I never did like parting with the last $20, so I spent it more slowly. Trouble was I was still drawing around $100/month. And for what?
I don't remember exactly when it dawned on me that there was no need to spend any money during the course of the working day, but at some point I became comfortable carrying no cash on me at all. Hey, I live in a city of 4 million people - it's not like I wont be able to find an ATM if I need one! Since then I've only taken out cash when I know I need to buy something (which is almost never) and if I keep going at the current level, I'll spend less in a year than I did in a month previously.
Basically, I'd recommend this as a super effective way of saving yourself a small fortune to add to your stash and take one not-so-small step towards FIRE.
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St4n, Thanks for sharing! I actually just withdrew $20, instead of my usual $100 with your same logic, but I think I'll do exactly what you suggested, only withdraw money when I know I need to buy something, instead of carrying it just in case.
If you need any kind of appliance, the first place I would look is the FREE section of Craigslist. It's amazing what people give away for nothing.
Entertainment spending is high, but you seem to already know that.
As of 5 minutes ago, my local credit union is offering a 15 year at 3.125% (APR of 3.178%). If you are planning living there for the extended future, you might explore a refi. Ran the numbers and that would be monthly payment of 1219.07
Principal: 763
Interest 456
Suppose you could also find an attractive 12 year option....
http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx
I just kind of assumed that I wouldn't be able to refinance with a traditional loan, because I have no equity. I bought the house for $225k in 2009 and right know it might be worth around $175k, which is what I still owe on it. I suppose I could pay it down to where I would have 20% equity, but it seems like a marginal gain to go from 3.875% interest to 3.125%. I think I'd rather direct the money right into the market, then to paying down the mortgage any quicker.