Hi Everyone –
Been lurking here for the past 3 months and really enjoy the positive financial environment. I’ve been an extremely poor financial role model despite having a fairly decent job and stable living situation. At a young age, I was sucked into the consumerism mantra without realizing what I was getting myself into. I quickly became underwater in debt (30K+) and didn’t have any plan to escape it. I robbed my 401k to buy toys I didn’t need, which was completely idiotic looking back now and I probably needed several good face punches at the time. Anyway, the past is the past and I’m now trying to reconcile my financial future after coming off a bankruptcy two years ago.
I’m currently 34 years old, married to a lovely wife (33), with a son (2 ½). We all live in southern California, which is obviously a very expensive location – but this is required due to my job. I feel like for the past year, we’re finally able to get our financial life in some order and actually talk about our FIRE future.
At the moment, my wife stays at home with our son – though she does have a side business that helps to generate some additional income. I’m the sole breadwinner and make around $85K pre-tax.
We currently own our home, which we were able to salvage through the bankruptcy. Unfortunately Looking back, this was a good decision as the value has gone up tremendously over the past 3 years. We also bought at the low-end of the market, which has allowed us to live in a great neighborhood while not having an insanely large place – currently 2000 sq ft. The only downside is the location relative to my work, which is about a one hour commute (each way). However, I currently utilize a vanpool option – which allows us to only need one car for my wife during the day. Generally I’m able to work from home two days per week, which means I’m only having to deal with the commute 2-3 days per week. The time I’m in the vanpool, I can be doing other things – so it’s not really wasted time.
Here’s a little more specific info about myself, before asking my specific question(s):
Income: $85K pre-tax + possible bonus at year end (2-3k) – which we don’t include in our budget.
Not including my wife’s income here because it’s so variable. I’d say she makes maybe 5-10k per year, max.
Monthly Income post-taxes and 401K: $5057
Current expenses - Bills:
House - $1835/mo (incl. taxes/insur)
HOA - $100/mo
Car (2012 Honda Fit) - $250/mo – I know, facepunch.
Cellular - $160 (working to get this reduced)
Internet - $70 (I work from home a lot, so not sure I can go with slower/less reliable service)
Electricity - $100
Gas - $40
Gym - $110 (Most of this is my wife’s personal training, which she will be dropping at the end of the year. Should be down to $40 then)
Gardener - $65 – Facepunch – part deux ☺ I’m in the process of acquiring some yard tools from my neighbors to start doing this on my own.
Water Bill - $50
Term Life Insurance (wife & myself, 300k ea.): $45
Total Bill Expenses: $2825/mo
Current expenses - Funds:
Gas (includes Vanpool @ $111/mo): $300
Groceries: $700 (don't see us cutting this much with 3 people)
Entertainment: $100
Medical: $100
House Maint.: $75
Car Maint: $75
Personal Care (hair, products, etc.): $125
Gifts: $40
Clothing: $75
Pets: $75
Xmas Savings: $100
Travel Savings: $100
Emergency Savings: $100 + any extra income from my wife
Total Funds/mo: $1965/mo - Obviously all of this money isn't spent each month, as we let some of these funds build up for awhile.
Assets:
Emergency Savings: $4K (currently working to reach 15K)
Home Value - $400K
401k - $13K; currently contribute 8%, plus 4
Pension – $3.5K (total, yes, that’s it – not much)
T-Rowe Price IRA – $6.8K
501b - $2.7K
Total: 426K – definitely not good for our age, especially since most of this is equity in the house
Liabilities:
Mortgage: 243K
Honda Fit Car: 13K
Total: 256K
TOTAL NET WORTH: 160K
Specific Question(s):
I recently calculated our savings rate for the past year via Mint, which equated to around 21% (incl. 401k). Obviously this is nowhere near mustashian enough, and I’m looking to hit the 50% mark by March of 2015.
In my situation, would you consider selling the home to move closer to work? The difficulty here is that home rental pricing near my company is probably 2-3x where I’m living now (in the 2.5-3.5K range for similar sq footage). There is definitely no way I could afford to buy near my workplace, given the home prices are in the 600K range. Also, my wife absolutely loves our neighborhood (I do too), plus the schools are excellent for our son once he reaches that age.
I’m investigating a lot of options for budget reduction over the next 6 months, so I can hopefully continue to push our savings rate higher. Any guidance or helpful hints would be greatly appreciated ☺
Thanks in advance!
-StarterStache