Reader Case Study – Getting to Zero
I’m a 29 year old guy working in software, married with my first son arriving any day now. We have two other wonderful boys from my wife’s first marriage.
I’ve made more than my share of mistakes, and for a long time I wasn’t planning on there being a future to plan for. I dug myself quite a hole.
My wife came along and pulled me out of it, and now I have a steady job, my health and sanity, and a beautiful family. It’s more than I could ever deserve.
That’s what brings me to MMM. Getting up every morning and leaving them gets harder every day. The kids are growing like weeds and I know I’m missing things right and left. Here I am, ready to get punched in the face. So I ask you, dear Mustachians, where should I start?
Income:
15.8 mile commute
Gross Salary - $75,675.60
Net salary after taxes, health insurance, and 1% toward 401k - $4,524.96
Yearly Bonus (very consistent) – 23% of Gross Salary – I’m guessing $10,455 after taxes
Child Support - $375.36 every other week, or if you want to look at it monthly ($375.36 * 26)/12 = $813.28
Total Monthly Income I can count on: $5338
Hopefully I still get the bonus and a tax return every year.
Expenses:
Trash Service - $13.50
Clothing - $250
Cable/Internet - $175
Life Insurance - $37
Utilities - $125
Prescription - $25
Wife Cell Phone - $40 (on her mother’s plan)
Car Insurance - $70
Netflix - $8
My Cell Phone - $73 (with work discount)
Food (groceries, eating out, toiletries) - $1148
Water Bill - $78
Gas - $325
Total: $2367.50
I’ll assume expected ER Expenses are the same: $2367.50, or $28,410 yearly.
Assets:
2005 Pickup - $14,000
2011 Jeep - $12,000
House - $186,000
My 401k - $2,000 (50% employee match on first 6%, currently at 1% contribution rate)
Her 401k - $2,000 (rolled over, no current contributions)
Checking - $5,800
Savings - $10,000
Total: $231,800
Liabilities:
Mortgage – 4% for 30 years - $176,000 - $1421 monthly
Wife Student Loan – 2% - $7,757 - $168 monthly
Alimony, sort of (credit card debt of my ex) – 14% - $15,234 - $413 monthly (57 months remaining, unless they’re paid off before then)
My Student Loan #1 – 9.75% - $5,571 - $45 monthly
2011 Jeep – 2% - $9,823 - $208 monthly
Stupid Consumer Loan – 6% - $4,900 - $230 monthly
2005 Pickup – 7% - $19,000 - $430 monthly
My Student Loan #2 – 4% - $15,196 - $105 monthly
Total Liabilities: $253,481
Monthly Liability Payments: $3020
Net Worth: -$21,681
You’ll probably note that expenses + liabilities exceeds income. A bonus and/or tax return is currently a must to build up and then coast until the next one.