Author Topic: Reader Case Study: Evaluate our 2016 budget  (Read 4130 times)

takemewest

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Reader Case Study: Evaluate our 2016 budget
« on: January 19, 2016, 12:13:45 PM »
Hi everyone,

We're trying to tighten the belt this year and would love any and all feedback on our budget. I feel like we're saving enough for our age but not enough to get ahead of the curve. We haven't set an official ER date, but I'd like to imagine what retiring at 45 would look like. This is the first year in many that we've had two incomes because my while husband was in the military (and overseas) it was hard to find full-time employment. I want to make sure we don't waste our savings potential this year, so I welcome any feedback or suggestions.

About us:
  • DINK, 32 years old, gross combined salary is $95,000.
  • Live in medium COL area.No debts aside from mortgage, which is $202,000 at 3.8%.
  • Net combined monthly income after taxes, health insurance, is $6200
 

Monthly Expenses
mortgage (PITI +$100 extra)   1200
internet                                       50
cell phones                             135
utilities                                     250
insurance                                     148
auto gas                                     100
groceries                                     600
entertainment/clothing             300
Total    2783

Monthly savings (combined)
Combined monthly defined contributed plan (max amount)    550
Combined monthly defined contributed plan employer match   800
Roth IRA contribution                                                          550 (for max yearly)
Traditional IRA contribution                                                 500 (an old rolled over 401k)
College 529 for nephew                                                 100
Travel fund                                                                       600
House/Car improvements                                                  300
Total                                                                        3400              

As you can see, we still have about $800 to play with each month, and we're not sure where that money should go. We need to do some home upgrades, so we're thinking of shoveling that money in our house/car account.


Our retirement accounts right now currently sit at:

TSP from military service (can't contribute): $32,000
Roth IRA: $68,000
IRA: $3,000
529: $1,200
His DCPP: $2,500
Hers DCPP: $1,400
Old TIAA investment account from previously 401b (don't contribute to this right now): $7,600
Emergency savings: $15,000


Thanks for any thoughts you might have! I'm new to this, so let me know if I can provide more info or clarify anything.

ohana

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #1 on: January 19, 2016, 12:18:11 PM »
Things that stand out for me:

cell phones.  You can get a great $10/month plan from Republic Wireless.  Savings:  $100/month assuming 2 phones (includes taxes)

travel savings.  You need $7200/year for travel?  Seems excessive.  Try some staycations this year and save that money instead.

AZDude

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #2 on: January 19, 2016, 12:25:46 PM »
You are in good shape. Over 50% savings rate, relatively low monthly expenses and no debt outside of a mortgage. About $700K away from FIRE, and on track to reach that point in about 10 years.

If you are looking for ways to cut your budget, the cell phone bill is too high. Groceries are also kind of high for just two adults. Other than that, things look good.

rubybeth

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #3 on: January 19, 2016, 12:39:23 PM »
Phones, groceries, and entertainment/clothes seem high to me, but not sure if you can get out of your phone plan easily, what you eat (any food allergies or requirements like keeping kosher, etc. may affect ability to cut this), and what kind of entertainment/clothing you really need (if you're building up a professional wardrobe, a bit of this makes sense, and if you've cut back on entertainment from like $500/mo, maybe $300 is already a cut for you?).

As a comparison, DH and I spend about $300/mo on groceries (maybe around $100 on restaurants, which are both entertainment/date nights and food), and spent about $2,000 on entertainment in the last 12 months--this includes everything from Netflix & Hulu to library fines, massages, season tickets for the orchestra and other random concert events, etc.

Easye418

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #4 on: January 19, 2016, 01:19:57 PM »
Looks good.  Not enough to worry about.

takemewest

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #5 on: January 19, 2016, 01:51:55 PM »
Thanks for the feedback, everyone. I think the clothing/entertainment budget could really be slashed. We're not big shoppers, and we mostly use hiking as our entertainment, so I think we could take that to $100 and be fine. We also double allocate some eating out money in our groceries, so we could really cut back in that area I think.


The food budget is high because of our own self-inflicted preferences (organic and all that jazz), and food intolerances to more budget-friendly staples (husband can't eat beans, peanut butter, etc.) so I don't see much movement there.

I should have mentioned that my husband gets a phone bill credit from his employer each month, so I guess we're only paying about $85 for both smartphones. But I still thought we were doing relatively well there! Now that I have been reading some of the posts about Republic, I can see how that is high.

The travel account is high because that's our thing--the family that's most important to us lives far away, and we pay to travel to see them (or fly them to us) multiple times a year (they can't afford travel). Additionally, I teach overseas in the summer, so we always tack vacation on to that, which makes for a hefty airfare bill for my spouse.

Bracken_Joy

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #6 on: January 19, 2016, 02:00:17 PM »
Looks great! All I was going to mention was clothes/entertainment, and you already re-evaluated that. Only other thing I can think of is some sort of sink fund for house needs, but since you have the e-fund, it's really not needed.

SomedayStache

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #7 on: January 19, 2016, 02:21:20 PM »

Roth IRA contribution                                                          550 (for max yearly)


If this is $550/month I don't understand how this is the yearly max.  Over 12 months that would be $6600.

The yearly max for one person in 2016 is $5500 for your ages.  So you are over that.  If you are each doing a Roth then you should have $11000 of space.

former player

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #8 on: January 19, 2016, 02:35:30 PM »
Are you planning kids of your own?   The 529 for your nephew is generous of you.

You might think of recategorising your travel fund and house/car improvement funds as sinking funds rather than savings.

Are you happy with where and how your various funds are currently invested?  According to MMM forum groupthink, any spare savings should probably go into a taxable Vanguard account.

You are putting $3,600 aside each year for car and house improvements, and if you add in the $800 a month that is an additional $9,600.  How much upgrade to the house do you have in mind?

You could go further and be fully mustachian, but you are doing pretty well as things are.

MDM

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #9 on: January 19, 2016, 02:54:10 PM »
DINK, 32 years old, gross combined salary is $95,000.
Net combined monthly income after taxes, health insurance, is $6200

Combined monthly defined contributed plan (max amount)    550
Combined monthly defined contributed plan employer match   800

Thanks for any thoughts you might have! I'm new to this, so let me know if I can provide more info or clarify anything.
Is the "defined" plan a 401k or something else?  If something else, what?

Do either/both of you have access to 401k plans?

For 2 earners, it is not uncommon to have $18K + $18K + $5500 + $5500 = $47K/yr space for tax-advantaged investment.  Do you have access to that much?

beantown

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #10 on: January 19, 2016, 03:22:12 PM »
Since you travel a lot, I would advise looking into getting into the credit card game to start racking up airline miles. It's a little intimidating when you first start (and there's a lot of misconceptions out there on how it will hurt your credit score, etc.) but once you start and learn more it becomes super easy to manage and could easily save you thousands of dollars each year in airfare. As an example, my partner and I traveled to Asia last summer and used miles to fly back and forth, which easily saved us $2k in flight costs.

takemewest

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #11 on: January 19, 2016, 08:11:06 PM »

Roth IRA contribution                                                          550 (for max yearly)


If this is $550/month I don't understand how this is the yearly max.  Over 12 months that would be $6600.

The yearly max for one person in 2016 is $5500 for your ages.  So you are over that.  If you are each doing a Roth then you should have $11000 of space.

You're right--I checked with husband b/c I couldn't remember why this number is $550, but we're doing a minimal catch up for not doing the max last year. Once our catch up window expires, that'll drop down a little to be just at the max.

takemewest

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #12 on: January 19, 2016, 08:13:53 PM »
DINK, 32 years old, gross combined salary is $95,000.
Net combined monthly income after taxes, health insurance, is $6200

Combined monthly defined contributed plan (max amount)    550
Combined monthly defined contributed plan employer match   800

Thanks for any thoughts you might have! I'm new to this, so let me know if I can provide more info or clarify anything.
Is the "defined" plan a 401k or something else?  If something else, what?

Do either/both of you have access to 401k plans?

For 2 earners, it is not uncommon to have $18K + $18K + $5500 + $5500 = $47K/yr space for tax-advantaged investment.  Do you have access to that much?

This is where my knowledge stops short. I'll have to do some more reading about our accounts. We both just got into new jobs, and my old job had a 401k, but I'm not sure exactly what type this is (our HR person calls it a "DCPP"--defined contribution pension plan), but I think it is the equivalent of a 403b, and I'm not sure the $18k max would apply. If it it does, surely we should be putting way more money there and pulling back other places. Thanks for pointing this out! Time to get more detailed...

takemewest

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #13 on: January 19, 2016, 08:16:58 PM »
Are you planning kids of your own?   The 529 for your nephew is generous of you.

You might think of recategorising your travel fund and house/car improvement funds as sinking funds rather than savings.

Are you happy with where and how your various funds are currently invested?  According to MMM forum groupthink, any spare savings should probably go into a taxable Vanguard account.

You are putting $3,600 aside each year for car and house improvements, and if you add in the $800 a month that is an additional $9,600.  How much upgrade to the house do you have in mind?

You could go further and be fully mustachian, but you are doing pretty well as things are.

No kids for us (unless that wind drastically changes). We're both very happy as a couple and have no desire to be parents. I realize *nothing* is ever set in stone, but we're as set as we can be on that front w/o having a crystal ball.

I didn't think about the "sinking funds" distinction--seems like that would be important to know and pull out of the general savings category--thanks! We probably need to put in about $10,000 a year for a couple years into our house to bring it up to par with the neighborhood and put it in good condition to sell at a moment's notice if we wanted to (no plans to do that, but while we have the cash flow, we thought it wise to get the work done).

rubybeth

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Re: Reader Case Study: Evaluate our 2016 budget
« Reply #14 on: January 20, 2016, 10:30:28 AM »
Okay, that makes sense re: my questions.

Also second the travel rewards card recommendation. I love our BarclayCard Arrive Plus card--it's saved us hundreds on travel in the last couple years. http://www.findmybarclaycard.com/barclaycard-credit-cards/arrival-plus/ The Chase Sapphire card is similar, I think. You're not locked into a particular airline or hotel chain, you just charge everything on the card and can reimburse yourself for travel expenses. It's really slick. If you can put gas/groceries on the card, I think you'd rack up a lot of miles this way.