Author Topic: Reader Case Study- Newly wed, newly moved, newly graduated- Help Us Do Better!  (Read 4470 times)

Bracken_Joy

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Life Situation: Me, 26, DH, 27. No dependents per se, but we live with my semi-disabled brother (he has good days and bad days). We get money for his part of rent and groceries, but we do all the shopping/cooking/cleaning/etc. We’re not sure how long he will live with us- maybe as long as the next 3 years. Not sure how this will fit with wanting to have children though, as we’re currently renting a 2/1 house. We are hoping to start a family a year or two from now. We’re both inclined to the 3-4 kids range, but are completely open to the fact that reality/fertility/kids temperament/health/etc will influence this. Currently, DH works full time and is working on his masters in the field. He has 1 year down, 2 years left on the masters and licensing. He is taking over the family business in the field, and this should happen within the next 5 years. Earnings should go up substantially, once he takes over (current owner makes $175-225k/year, but works himself to the bone, so may not be quite this high). I just graduated from nursing school and am looking for a full time job currently, but we would like me to be at most part time, possibly leave the field for a couple years to be a SAHM when kids are little.
Our current goals:
1-   We probably need to purchase a second car soon- like within the next 3 weeks. We’ve been borrowing from family, and they want the car back. Since DH is often gone for work (2-3 days per week) there’s no way for us to be a one car family, especially once I find a job.
2-   We would like to buy a house someday. I really don’t want to have PMI, so I would like a sizeable down payment. We’re not sure yet where we will be settling (depends on DH’s work), but it is unlikely to be the city we are in now- somewhat of a real estate bubble currently, IMO.
3-   We want FI. It’s unlikely we’ll truly RE, DH loves his field of work and the jobs of a few people are dependent on him continuing to run the company. We would like the freedom to take extended vacations though, and do plenty of camping and adventuring around our great state.
4-   We are likely to be responsible for both sets of our parents as they encounter health crises as they age. This has already been true for my parents, although DH’s parents are younger. We have numerous siblings between us, but between disability, estrangement, substance abuse, and general inability to succeed in life, we’re who the families have got. As such, we need to not rely on my income. I've already been caretaker for 3 of the 4 parents during health crises. My parents will be okay financially, but I'm not so sure about DH's. Either way, I would be loathe to ever put them in a care home. Having worked as a caregiver in one, it is not a situation in which I would like to place a relative.


Gross Salary/Wage: Last year was $81,500

Pre-tax deductions:
SEP IRA: $16,500
tIRA: $5,500 (last year I didn’t work and we weren’t married, so I couldn’t contribute. This year I will, so this will be $11,000)
Note: I know the math doesn’t add up here to the AGI below. I don’t recall what it was, but something about how DH could only write off part of the IRA last year. We weren’t married, so he was filing singly. I didn’t have any income and didn’t qualify as a dependent because of my scholarships and loans.

AGI: $62,000


Taxes:
Federal: $9,600
State (8% income tax): $4,500

If I’m doing my math right (highly questionable) our Take Home Pay is $47,900, which is $3,991/month


Current Expenses: (this has gone down by nearly $1k/month since starting to read MMM forums. Thank you guys!)
Rent: $997
Health Insurance: $188 (not sure yet. DH is covered by employer, and we are adding me to his plan. Not yet sure how much this will cost. I am guessing $188, which is the amount paid for his monthly)
Yearly expenses, amortized (Prime, Costco, Renter’s Insurance, AAA): $32
Gas: $250-300/month
Groceries: $500
Dining out: $200 (this will be high, we’re not going out at all this month- we’ve brought this category down very far and are working to bring it down farther. I think it’ll “settle in” at about $75)
Work dinners for DH: $70  (we have him take lunch, since these aren’t important for the ‘social’ part of his contracts, but dinners are an unfortunate must. He keeps them low though- this is for 4-6 dinners/month)
Dog expenses: $30
Student loans: $107  (in October, this will increase to probably $400/month since my loans will no longer be in deferment)
Internet: $27
Utilities: $70
Coffee: $30
Variable monthly expenses: about $200-500 (This is way down from previous- marriage, honey moon, school costs, and then some consumer stupidity- probably used to be closer to 800-1000/month)
Total: $3,000-3,200/month

(This leaves a $700-900 average buffer, but in reality, this varies wildly based on monthly income. Some months are $7,000 income months, some are…. Not so much)

Expenses we will be taking on soon:
My cell phone (his is covered by employer)
Car insurance
Dental cleanings
New (to us) car.
Possibly other expenses I'm not foreseeing! Gradually taking over all expenses that my parents have provided for me, generally things on family plans like cell, car insurance, etc.

Assets:
DH SEP IRA: $15,450
DH tIRA: $5,730
Me Roth IRA: $1,640
Me non tax advantaged investments:  $16,900
Cash: $11,000
Total: $50,722

Liabilities:
DH’s student loan: $7,350 @ 7%
My student loans:  total: $37,750
Federal:
5,550 @ 3.86%
7450 @ 3.86%
5500 @ 4.66%
7250 @  4.66%
6000 @ 5.00%
Private:
6000 @ 5.74% (I already paid off another $6k loan at 7.5%)
Total Liabilities: $45,100

Net worth: $10,703 according to mint using exact numbers (I rounded on 10s on a lot of these)

Questions:
1-   Will we be able to afford children?! I know there’s never a good time to have kids, but I also know $45k in debt is nothing to sneeze at.
2-   Where can we improve our expenses? I have some ideas, but maybe I’m blind to something.
3-   Am I crazy? It feels like we’re pretty tight on the budget, but it feels like we’re not saving much in light of that. I feel a bit dead in the water.
4-   Buying the new (to us) car. We would like to be under $10k for this, and are hoping to get a commuter care to bring down DH’s gas expenses. We’re thinking a Jetta or Passat TDI. My understanding is a hybrid really only saves for you on in-city driving, and DH does mainly highway, hence considering a diesel. Someone correct me if I’m wrong. (And I know everyone loves Honda Fits on the forum, but even a Jetta just feels so so small to me. I grew up with big trucks and SUVs, and it’s terrifying to barrel down the road in such a tiny vehicle.). Recommendations for a fuel efficient highway car that won’t make me feel like I’m going toward my certain death (ie, though safety is an illusion, it’s an important one for me)?
5-   Any general feedback people can provide is much appreciated. I struggle a bit with investing concepts, and am doing the best I can, but DH had never even heard of an IRA until we were dating. So it’s uphill for the both of us.

Thank you all!

MDM

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If I’m doing my math right (highly questionable) our Take Home Pay is $47,900, which is $3,991/month
Probably worth using something such as Taxcaster and/or the MMM case study spreadsheet to project your 2015 taxes.  You can also use the spreadsheet to calculate overall cash flow.

Quote
Questions:
1-   Will we be able to afford children?! I know there’s never a good time to have kids, but I also know $45k in debt is nothing to sneeze at.
The short answer is "yes, people with lower incomes than yours do it all the time."  Looking a little deeper, waiting a few years for
 - resolution on your brother's and your housing situation
 - DH out of school
 - better understanding of your cash flow
might be much less stressful.

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2-   Where can we improve our expenses? I have some ideas, but maybe I’m blind to something.
Keep better track of where the money actually goes.  $500/mo is ~10X too much for "miscellaneous"

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3-   Am I crazy? It feels like we’re pretty tight on the budget, but it feels like we’re not saving much in light of that. I feel a bit dead in the water.
One day at a time.  Unless one inherits a fortune while still in school, most people start with zero or negative net worth and build from there.

Car questions I leave for others.

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5-   Any general feedback people can provide is much appreciated. I struggle a bit with investing concepts, and am doing the best I can, but DH had never even heard of an IRA until we were dating. So it’s uphill for the both of us.
Acknowledging the issues puts you ahead of many already - keep up the good progress and good luck!

robartsd

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You're doing great - it looks like your DH will finish grad school with a positive net worth!

I'm debt adverse - so I'd be inclined to cut back on retirement savings to pay down the higher rate student loans. I would certainly contribute enough to retirement to maximize any match or tax credit first, then I might focus on eliminating 2-4 of those student loans.

As far as car selection goes - be sure to read Top 10 Cars for Smart People. The idea that you are safer in a large vehicle is psychological. Safety testing and statistics show that you are not safer in trucks and SUV's than you are in passenger cars.

thegradwife

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If you are going to be taking care of parents, it might be easier to have kids sooner than later. Just my thought.

purple monkey

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+1
If you are going to be taking care of parents, it might be easier to have kids sooner than later. Just my thought.

Axecleaver

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Like you said, it's never the right time to have kids. At 26, if you get pregnant tomorrow, want four kids, and space them three years apart, you're going to have your youngest at 36. You'll be paying for college for that one until you're 58. There's a lot of assumptions in there and things could turn out better or worse. But if you want a big family, you probably need to get started on that ASAP.

Seems like you are doing really well on the savings so far. You're getting close to the tIRA phaseout, which is probably what your DH hit last year filing single. The phaseout for 2015 starts at 95k if you're MFJ, so you can stash 11k this way this year.

Nursing is very part-time friendly. My sister is an RN in the NYC suburbs, works full time and has three kids under 5. Just typing that out made me exhausted, but it can be done. She works three 12.5 hour shifts a week and spends the other time with the kids while her DH and MIL provide additional support. During her pregnancies she worked part time about 20 hours a week and had no trouble finding work.

With your DH income looking very promising in future years, you may want to consider doing Roth contributions this year. It will cost you on the taxes, but if your income will increase so dramatically in future years, it may be a better choice at this point in your life.

zolotiyeruki

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I think your grocery bill is a bit high for 2 people, but that can vary with your location.
MDM is right about the miscellaneous expenses--you need to get a better handle on what you're spending money on.

Your federal tax liability seems awful high.  Just with the standard deduction and two exemptions, your taxable income should be something like $42k, which should result in a MUCH lower tax bill than $9200.  Unless you're including FICA/SS in that number.

MaggieDrsg

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I guess I'll be the lone dissenter - I wouldn't be comfortable trying for a kid right now before you have a job, get a handle on your full expenses with the car, phones, insurance, etc., the full student loans to be taken out or which are not yet being paid, and know you can afford housing where you'd be comfortable with a baby.  In the interest of full disclosure, I'm a bit older than you and don't have kids (yet).

Student loan stomper

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Hey!  I am super new to the forums but I have a lot of the same questions as you and am in a similar situation (just married we are 27 & 25).  I hate debt, especially student loans so we decided we would kill student loans before we started a family.  I paid mine off plus my car, saved for our wedding, and an emergency fund) over the last 5 years (about ~$60K making $37k-54k).  and we should finish DH's 52k student loans by February (he started working last year and he makes about 26K).  It feels really good to get rid of debt, you feel so much more in control. 

Basically we followed Dave Ramsey's snowball plan.  Right now we are putting all of DH's income plus about 500 towards SL and budget the rest.  Then at the end of the month what is left over goes to SL's.  You could do this too once you start working and kill your student loans pretty quick.  Then starting a family won't seem quite as daunting. 


I too worry about how kids and taking care of parents will affect this plan.  But I do agree with other posters that have said that sooner than later is better for kids if your parents have health issues.  You are lucky that you your field is so friendly to working part time with (hopefully) good health benefits. 

look forward to hearing more about your adventure!

 

Bracken_Joy

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A few updates! It turns out we don't need another car right now! We'll be able to continue to borrow the relative's car.

People who pointed out the food budget are right, and we have been working on it. Last month we got going out to eat less than $100 and groceries about $500, and this month we're doing no restaurants at all and groceries should be even cheaper.

For clarification: we are not taking on any additional loans for DH's masters. Since it's required for licensure and the company NEEDS someone licensed since the previous guy is retiring, the masters is paid for (thank goodness- although we probably wouldn't be doing it otherwise!).

We're working on the debt pay-off, starting with the higher interest loans (DH has 2 that are 7%- we put an extra $300 toward the smaller one this month, and will likely increase that next month).

I have an interview next week, although it's not well paying ($20/hr, vs the $33 starting I would make in a hospital), but it's an interview and would be a very flexible position- 12 hour shifts (my preference) and I could work as much or as little as I want. We will see how that goes. In the meantime, I'm temping for a relative in their production warehouse making $10/hr. It's helping him and giving a little bump to our earnings, which is nice. This is something I could continue on off days when they don't have coverage once I'm hired, if I'm so inclined. I actually like a bit of physically demanding menial labor now and again, so I don't mind the work, although I do worry about chemical exposure. I just wear the respirator a lot more than the other workers do.

I know exactly where the misc. category goes, it just felt like a ton of room to write out. Unfortunately, it's mainly the "start up costs"- car insurance and vehicle registration and the outdoor BBQ. It also caught vet bills for our dog- she's older and we like to stay on top of her care. I absolutely agree though, we really need to get this down overall. It just always feels like there is something- dog has an infected root and needs a tooth extraction, we take on new expenses, we move and need to buy shelves to use as a pantry so we can store food to reduce our grocery bill, etc etc.

Re: the federal taxes being high- that's because that was DH's #s for last year, and we weren't married yet. He couldn't claim me as a dependent either, because I was paying enough from student loans. I'm not sure how the #s will come out this year. DH's income can vary greatly based on what contracts he has, and I'm not sure if/when I'll be working, etc etc etc. I get overwhelmed with the numbers and exceptions and stuff- if anyone has a calculator or similar that makes it easy to figure this all out, I would be so grateful!

myrax

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You are off to a great start! Especially with your husband getting a free graduate degree!

I would wait to have children until you have paid off your student loans. If you are able to get a full-time job that should take 18 months or less. You could even start trying when your 3 or 4 months away from full pay off if you are okay with continuing to work full-time during the beginning of your pregnancy.

MDM

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I get overwhelmed with the numbers and exceptions and stuff- if anyone has a calculator or similar that makes it easy to figure this all out, I would be so grateful!

See http://forum.mrmoneymustache.com/ask-a-mustachian/turbo-tax-vs-cpa/.  There are several references, links, attachments, etc. in that thread that might be useful to you.