Questions:
1) Where do you advise cutting spending? Shopping is obvious. Also, tips on wasting less food would be welcome.
2) Where should I invest that $1000? Into my Heartland funds? Maybe some Vanguard Index funds? Advice welcome.
3) Should we roll my husband’s 401k into a Roth IRA and pay taxes now, or just open a Roth IRA and wait until he has another full time job to roll the 401k into the new one?
Future Goals:
1) Own a house someday
2) Become financially independent - I'd like FU money even if I don't quit working super young
3) Retire at 50 years old (maybe sooner? IDK)
P.S. Please don't be too angry if I don't have everything written down just right. I've operated under a budget for 5 years (since graduating college), but this is the first time I'm really taking a look at the whole situation.
Thanks for the advice. :)
1) Just be smart when shopping. Include a "non budget expense" category in your budget, because random stuff always comes up (blow a tire, ointment to treat sunburn, home repair/purchase). You need to buy clothes and live, just don't be wasteful and extravagant. No need to turn into cave people, just don't be like the average American when it comes to spending and then "wondering" where all the money went.
2) Given the amount you're investing, I'd just say Vanguard index funds. I don't know what Heartland funds are, how they work, benefits/risks, so I'll defer to someone else. Remember, in the long run
how much you invest is more important than
what you invest in.
3) In general, it's good to keep some assets in a 401k and some in a Roth. If he were single, I'd suggest rolling everything over since you could pay barely any tax while he has low income, but since you're married it gets more complicated. Look up "pro rata" rule for Roth conversions. Basically, if you have other pre-tax accounts, the tax benefit is reduced when converting to a Roth. The only real way to get around this is to convert ALL of your pre-tax accounts and pay all that tax up front.
- keep it simple: Keep what you have, and optimize going forward. It's good to have a mix of pre-tax and tax free (roth) accounts.
Your situation overall isn't bad at all. Zero debt (applause!!!!). In general, don't count non-liquid assets in your net worth (e.g. cars). They have liquidation value if you were to sell, but are depreciating assets.
In any case, ~$180k in assets (and net worth) is nothing to sneeze at given your ages.
From a long-term perspective, you have maybe a $12k opportunity by cutting expenses ($1k/mo like you said), but some of that is just life expenses like health care, home expenses, etc. Let's call it $10k expense opportunity if you got really frugal!
To me, it seems that
income is a bigger opportunity, either in your contractor work or in husband's work. A $60k income isn't bad, but given your education, I think this could be much better. Hubby needs to get on board with being frugal and saving/investing. You/he can't afford to be spendy while he makes <$15k/yr, and you/him combined make ~$60k.
If you manage to cut your expenses by $10k, and increase your income by $10k, that's $20,000! If you avoid lifestyle inflation as your income increases further, this spread will widen and you'll be on a much more definite path toward financial goals.
To conclude, work to be mindful of spending, but no need to take draconian measures. Think about the income side of the equation as well to determine what you think is reasonable to achieve given your goals/abilities/lifestyles wishes.
Good luck!