Author Topic: Reader Case Study - Critique please?  (Read 4210 times)

CletusMcGee

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Reader Case Study - Critique please?
« on: May 02, 2015, 08:40:37 AM »
Just wanted to post our situation out there and see if anyone has any comments or criticism (all figures annual):

Life Situation: 
34M/34F, Married w/ no kids (probably never). 
Live in Mankato, MN (low-cost college town). 
Both of us have solid professional careers. 
Two siberian huskies and a malamute (DW's "Dog Farm").

Gross Salary:  $136K (combined)

Pre-tax deductions:  401K: $10320 + $6000 employer matches.  Insurance: $2400. 

Other Ordinary Income:  $300 annually from ESPP dividends. (Big whoop)

AGI:  $123,580

Expenses:
Mortgage payment: $8004 (annual P&I), $3084 (annual T&I)
2nd Mortgage: 3900 (annual P&I)
Note: We have a second due to when we refinanced we did not have 20% equity and did not want to go the PMI route since it is no longer tax deductable.  Also, we pay an additional $2100 annually towards the second to get that fucker taken care of quicker.

Groceries: $4800
Student Loans: $3900
Taxes: As DINKs we usually end up paying in 2-3K a year.
Home Maintenance:  Varies, but I'd say about 2-6K a year.
Dining/entertainment/travel/fun stuff: $12,000
Gasoline: $1200
Electricity: $1000
Cell phone bills: $1000
Gas Bill: $984
Haircuts: $800 (I'm f'n losing mine so soon I'll stop paying for it, but most of this figure is from DW anyway...)
Car Insurance: $750
Water & Garbage: $660
Internet: $636
Vet bills: $500
Dog food: $600
Firewood: $300 (Woodstove, which can heat the whole house and has come in handy when we have lost power for several days here up in Winterfell)
Car tabs: $200

Total expenses: $54,418

Assets:
House: $197,000
401Ks: $128,300
Roths:  $24,320
Emergency Fund:  $27,000
ESPP stock: $4132 (CNSL, if yer interested)
Vanguard VTI ETF:  $1000 (Just opened recently, plan on socking away $1000 a month here)
2006 F150 (I know, I know... In my defence I haul a fair amount of firewood and it is the designated "loaner truck" to basically anyone who asks me nicely to use it to haul shit.)
2008 Rav4 (Just hit 50K miles, we don't drive a lot)

Total assets:  $381,752

Liabilities:
Mortgage: $141,890 @ 3.5%
2nd Mortgage: $11,756 @ 5.5%
Student Loans: $5,475 @ 2.5%

Aside from that, my office is less than a mile from our home so I walk/bike a lot.  DW's office is about 2.5 miles away but involves a steep ass river valley climb so she doesn't bike very often. When all is said and done, our net worth has been increasing at a pretty consistent $60K a year.  We have about 18-24 months left on the second mortgage and student loans and after that the money will go towards the ER pile.

Again, any comments/criticism/facepunching are appreciated. Thanks.

[Edited, because math]
« Last Edit: May 03, 2015, 06:24:04 AM by CletusMcGee »

okits

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Re: Reader Case Study - Critique please?
« Reply #1 on: May 02, 2015, 09:05:11 AM »
Some quick ideas:

Can you get a line of credit and use it as an emergency fund, so your 27k cash can pay off debt?  You have two incomes, losing one job won't sink you immediately at your spending level unless you have a giant emergency come up.

Cell phone, Internet bills: have you read I.P. Daley's communications guide?

Facepunchable categories that could all be considered for trimming: grocery, dining out/entertainment, HAIRCUTS (sorry, but $800????), maybe your utilities (not a homeowner so don't know firsthand what's reasonable.)

If you loan your truck out a lot, do people at least fill up the tank or toss a bottle of wine your way?

Dog farm: love it. :-) We joke about doing this someday. Any pics of your pups?

CletusMcGee

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Re: Reader Case Study - Critique please?
« Reply #2 on: May 02, 2015, 09:27:58 AM »
I doubt I'd be able to get a HELOC right now, as I have a second mortgage already.  I do plan on opening up one as soon as the second is paid off.

Have not read I.P. Daley's communications guide, but thanks for the suggestion.  Although $52/mo for internet is a perfectly reasonable amount IMO.  Could probably trim the cell bill a bit though.

That big 12K blob of entertainment should probably be qualified further though.  We almost always cook at home (which I love), so it's not like we are going out to Le Bernardin every other night.  A fair amount of this figure probably overlaps with home maintenance too, as I'm always fixing something around here.  I wish I could break it down further, but it's saturday and time to be lazy.  I do agree there is room for improvement here though.

DW's haircuts / colors do irk me, but I'm not ready to broach that subject just yet...

As for the truck lending, yes, there is almost always some form of "useful liquid" contained therein upon it's return ;)

Puppies:
http://imgur.com/VUa15HJ
http://imgur.com/gjfoczG

myhotrs

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Re: Reader Case Study - Critique please?
« Reply #3 on: May 02, 2015, 11:04:51 AM »
But you could pay off the second and the student loans and still have a decent amount left that you could rebuild within a few months (or get a HELOC). I've never liked the emergency fund idea anyways, can always use credit cards, 401k loan, LOC, 0% balance transfer, etc...

I'm sure the loans are costing many times more than you're earning on the emergency fund.

Awesome job though!! You guys are going to be FI in no time.

CletusMcGee

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Re: Reader Case Study - Critique please?
« Reply #4 on: May 02, 2015, 12:20:40 PM »
Your ideas intrigue me, and I wish to subscribe to you newsletter ;)

On second thought, I think I will go ahead and at least nuke the second mortgage with my emergency fund - it's not exactly paying jack with current interest rates and the 5.5% apr on the second kinda chaps my ass a little.

While our jobs are stable, I really like having a fair amount of FU money so that I'm not in a position of utter servitude to my boss.


myhotrs

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Re: Reader Case Study - Critique please?
« Reply #5 on: May 02, 2015, 01:20:13 PM »
Just noticed the interest rates on the loans! Yeah, pay off the second but let the student loans run, at 2.5% and tax deductible its not hard to beat that return.

FU money can be dangerous! I barely put up with crap at work even though I'm still at least a few years from FI. Having a few 00k available makes it hard to care about corp BS.

Calvawt

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Re: Reader Case Study - Critique please?
« Reply #6 on: May 02, 2015, 01:51:39 PM »
I would increase your 401k percentages to the max if possible as well.  I would do that before putting $1k a month into a taxable account due to its tax deferral advantage.

As previously mentioned, you could do better on some spending, but you are in good shape.

I agree with using the cash to eliminate the second mortgage now.

mozar

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Re: Reader Case Study - Critique please?
« Reply #7 on: May 02, 2015, 04:30:49 PM »
Thank you for the puppies!

MDM

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Re: Reader Case Study - Critique please?
« Reply #8 on: May 02, 2015, 04:43:42 PM »
Just wanted to post our situation out there and see if anyone has any comments or criticism (all figures annual):
Gross Salary:  $136K (combined)

Pre-tax deductions:  401K: $10320 + $6000 employer matches.  Insurance: $2400. 

Other Ordinary Income:  $300 annually from ESPP dividends. (Big whoop)

AGI:  $140,500

How does $136,000 - $10,320 - $2,400 + $300 = $140,500?

okits

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Re: Reader Case Study - Critique please?
« Reply #9 on: May 02, 2015, 04:47:05 PM »
I'm onside with myhotrs' suggestion you pay off the second mortgage. For the LOC, even an unsecured one (higher interest rate) is okay because it's for true emergencies, only.  Too much idle cash is a waste, and FU money isn't just what's in your savings accounts. I consider it all my family's financial assets. I can liquidate years worth of expenses in minutes and have the cash sitting in my chequing account in a few days. Meanwhile, until I need it, it is earning investment returns.  (If you read the Epic FU stories thread, quite a few people who quit ended up landing on their feet and not touching their FU money at all.  You may never need it for that purpose.)

Love the dog pictures, adorable!

Prepube

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Re: Reader Case Study - Critique please?
« Reply #10 on: May 02, 2015, 11:36:36 PM »
Just out of curiosity, what are you feeding your canine herd that only costs 50/ month?  My three big breeds gobble up more than twice that amount each month (they eat about 100 pounds of good quality large breed chow per month). 

CletusMcGee

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Re: Reader Case Study - Critique please?
« Reply #11 on: May 03, 2015, 12:37:13 PM »
I would increase your 401k percentages to the max if possible as well.  I would do that before putting $1k a month into a taxable account due to its tax deferral advantage.

As previously mentioned, you could do better on some spending, but you are in good shape.

I agree with using the cash to eliminate the second mortgage now.

Good point, by maxing out my 401k contribution I can soften the blow at tax time somewhat.  Also not having that $325/mo second mortgage payment will make the take home pay cut doable.
We probably are spending more like $80-$100/mo on dog food.  DW handles that so I don't really know the exact figure.  On the plus side, huskies/malamutes are generally pretty "fuel efficient" dogs for their size and generally don't eat quite as much as other breeds their size (at least not when they are pulling sleds 1000 miles through the snow).