Life situation: Young attorney two years out of law school and stay at home wife with 10 month old daughter. Live in Midwest. Wife will be returning to work part time in education for modest increase in income in the fall. We are both relatively frugal by nature, but that comes from upbringings where frugality was a matter of necessity. The limiting factor was lack of money-- not choosing to be frugal despite available money. Many extended family members are decidedly not frugal. We have done considerably better than our other family members but learning to be frugal despite an abundant income is a newer concept for us.
NOTE: All figures are expressed monthly
Gross Salary/Wages: Monthly $6,333.34
Other Income: I supplement with teaching occasional classes at local college; wife supplements with freelance piano gigs as available. We will ignore this income for purposes of this case study, as supplemental income is primarily used to pay down debt.
Tax Withholding: Federal: $683.94; State: $278.06; SS $379.56; Medicare $88.76; Total: $1,430.32*
*NOTE: We claim 0 exemptions for purposes of withholding despite knowing the conventional tax planning wisdom of limiting withholding for behavioral reasons-- it is easier to make wise decisions with a larger chunk of money in the form of a tax return than smaller bits in the checking account throughout the year. I'm open to critiques on this as the practice was started before we discovered MMM. If we change this, I will just need to figure out how to ensure the new monthly income is invested appropriately and doesn't burn a hole in my or my wife's pocket.
Monthly Take-Home Pay: $5,409.69
Deductions / Savings:
401(k) Contribution: $760; divided $253 in Roth bucket (my contribution); $507 in Traditional (employer's contribution and match).
Healthcare Flex Spending Account: $125.00
Mortgage Principal: $232.00
Current Expenses:
Mortgage Interest: $590.31
Escrow Payment for RE Tax, Ins.: $342.26 I think there is opportunity for savings on home insurance
Groceries: +/- $400.00 this category includes anything bought at grocery store, including otc meds, toiletries, diapers, etc. Food cost is lower.
Auto Insurance: $54.63
Trash: $21.00
Internet: $60.00
Cell Phones: $93.15 I have smartphone bought before discovering MMM, wife has dumb phone. Reluctant to change service providers to "discount" carrier because of poor reception in area.
Life Insurance: $70.00
Sling TV $20.00 Unnecessary but it was a compromise to cut much more expensive satellite TV
Restaurant / Fast Food: +/- $30.00
Transportation (Gas and maintenance on two older, efficient, paid-for cars): +/- $120.00 Savings will come with my new bike-to-work habit
Gifts / tithes: +/- $100.00
Home Maintenance: +/- $50.00
Miscellaneous: +/- $400.00
Healthcare Spending:
Health Insurance: $680.82 (Wife / Daughter on private plan)
Health Insurance: $86.30 (My portion of premium through employer plan)
Prescription Formula: $611.00 (half of this expense is reimbursed through a state program, as long as funds are available)
NOTE: I know this category is absurd. I hope to transition to a HDHP with HSA during the next open enrollment period, but the way my employer structures its health insurance offerings complicates matters. Formula expense is not covered by health insurance, but necessary and unavoidable due to daughter's rare health condition (just take my word for it, I would avoid this expense if I could). We went with "traditional" gold insurance plan for wife/daughter this year in light of uncertainty about daughter's condition.
Utilities:
Gas: +/- 80
Electric: +/- 80
Water/Sewer: +/- 40
NOTE: I expect to see decreases in this category with recent changes to thermostat settings, dryer use, switch to LED bulbs, turn down of water heater temp, conscious effort to use lights less, low-flow shower head, etc...
Assets:
Vanguard Roth IRA: $4,000.00
My 401(k): $4,000.00
Wife's 403(b): $3,000
Wife has some $$$ in public employee retirement system-- not sure of the value.
Emergency Fund: $10,000 (about half in Ally Raise Your Rate CD @ 1.29% interest; about half withering away in traditional bank savings account with approximately 0.00% interest)
Home: approx. 176,000.00
Liabilities:
Wife Grad Student Loans: $23,500 @ 6.8%
Wife Undergrad Loans: Wife Undergrad Loans: $6,000 @ very low interest rate
Outstanding mortgage principal: $155,000.00; 30 yr @ 4.5% interest.
We currently pay $525.00 per month on Wife's Grad Loans and pay minimums on other debt. $525 is close to double the minimum on traditional ten-year amortization. We hope to increase this to more than $1,000 per month when wife returns to work in fall.
Specific Questions:
I am interested in hearing whatever advice, insight, and critiques anyone has to offer. I am specifically interested in savings opportunities I may not be seeing.
Also interested in critiques to our debt repayment / investment strategy. We currently contribute the minimum to take full advantage of employer match to $401(k). Pretty much all other effort is directed toward killing the high-interest student loans. Is there a better strategy?