Author Topic: Reader Case Study - What do we focus on?  (Read 8527 times)

meandmyfamily

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Re: Reader Case Study - What do we focus on?
« Reply #50 on: December 06, 2016, 09:58:26 PM »
Unfortunately I am an expert at rolling CC debt over to 0% interest cards.  There is no catch just a transfer fee of 3%-5% on some. 

Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #51 on: December 07, 2016, 05:25:28 AM »
Unfortunately I am an expert at rolling CC debt over to 0% interest cards.  There is no catch just a transfer fee of 3%-5% on some.
What I'm not sure of is what happens if the balance transfer is not completely paid off (or rolled over) by the end of the grace period. Seriously, these are the people who invented two-cycle billing. There must be a gotcha built in. Also, that BT fee adds up. Hopefully it's 3-5% of a much smaller number every time you roll the balance to a new card.
« Last Edit: December 07, 2016, 07:34:17 AM by Diane C »
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wintertell

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Re: Reader Case Study - What do we focus on?
« Reply #52 on: December 07, 2016, 05:50:16 AM »
This sounds ideal to me.

As long as it is on the condition that you will get at least a one month e-fund and still stay aggressive about paying these suckers off. But, I wouldnt get distracted from the debt payoff too long, as I want your cash flow to get better quickly....

Everyone has different levels of comfort when it comes to e-funds. When I was paying off 170k of car, student and mobile home loans, I kept a one month buffer ("live on last month's income" per YNAB's advice), plus about a 1k emergency fund. This was enough for the entire 2.5 years we were paying off debt super aggressively. Only now that we got all debt over 3% paid off are we building a multi-month fund.

Thanks wintertell. I think we'll doing something similar to what you suggest for a couple of months, then get back to aggressively paying down debt.

Another alternative would be to get your e-fund to 1k, and then save a set amount each month (e.g. 200) to get you up to a one month fund. Then you can really make progress on helping your cash flow and have a buffer against future debt. For us, both a lower monthly nut AND an e-fund were needed to stay out of debt. At first but was difficult because our cash flow was so tight - not a lot of room for error.

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #53 on: December 07, 2016, 07:28:42 AM »
What I'm not sure of is what happens if the balance transfer is not completely paid off (or rolled over) by the end of the grace period. Seriously, these are the people who invented two-cycle billing. There must be a gotcha built in. Also, that BT fee adds up. Hopefully it's 3-5% of a much smaller number every time you roll tabalance to a new card.

After reading the card agreement, there doesn't appear to be anything regarding a retroactive interest charge if the balance isn't paid in full by the end of the 12 month term. The introductory 0% rate does go up to 9.4% after that, which is much better that 15% or more. This is irrelevant though, since we don't plant to have a balance by then.

Another alternative would be to get your e-fund to 1k, and then save a set amount each month (e.g. 200) to get you up to a one month fund. Then you can really make progress on helping your cash flow and have a buffer against future debt. For us, both a lower monthly nut AND an e-fund were needed to stay out of debt. At first but was difficult because our cash flow was so tight - not a lot of room for error.

We're in a similar boat, in that we don't have a lot left over every month after our expenses are paid. The lower monthly payments in the beginning will help create some breathing room.

As I said earlier, we also plan to find a cheaper rental come spring. Hopefully we can trim at least $600 off the rent, more if I can convince Mrs. YR that we only need 1 bedroom (1 for the little raisins and we sleep on the fold out couch). Let's call that a stretch goal. Either way, that would really allow us to be more aggressive at paying of debt, then start saving.

meandmyfamily

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Re: Reader Case Study - What do we focus on?
« Reply #54 on: December 07, 2016, 07:57:20 AM »
Diane C- There is no "gotcha" with Citibank, Discover or Chase.  Just the interest rate goes up at the end of the term and then I transfer again.  Trust me I have done it too many times.

overwhelmed

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Re: Reader Case Study - What do we focus on?
« Reply #55 on: December 07, 2016, 08:54:27 AM »
Diane C- There is no "gotcha" with Citibank, Discover or Chase.  Just the interest rate goes up at the end of the term and then I transfer again.  Trust me I have done it too many times.

Agree.
I haven't looked at the terms but based on my experience (which may have a little something to do with credit cards), I'm assuming the balance transfer is basically a deferred interest promotion. They could be waived interest promotions but I'm not sure that makes a lot of sense from the lender perspective.
Deferred - You have 12 months to PIF in order to avoid the accrued interest charges.
Waived - you have 12 months to PIF in order to avoid interest, if you do not pay it off, the interest begins after the promotion ends

Basically there is a population of people who do not pay the balance before a promotional plan ends, making it worth offering. 
Also, fee income - transfer fee & late fee's add to the appeal for lending institutions.

Kansas Terri

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Re: Reader Case Study - What do we focus on?
« Reply #56 on: December 07, 2016, 09:02:49 AM »
Can your wife provide child care to one child about the age of her own children?

robartsd

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Re: Reader Case Study - What do we focus on?
« Reply #57 on: December 07, 2016, 10:03:04 AM »
My Mom did child care for many years. Here in California the law allowed her to watch her own children and one other family's children without being a licensed provider.

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #58 on: December 07, 2016, 11:59:00 AM »
Can your wife provide child care to one child about the age of her own children?

Possibly. We have a trundle bed for our 2 year old, so another child about that age could nap on the pullout bed. Only 1 crib though, so younger kids would be difficult. 

She'd have to try it out once or twice and see how it works. Would also depend on how many hours a day and how many days a week. Having 2 kids under 2 is already a lot of work, so adding a 3rd to the mix could be overwhelming.

RedwoodDreams had the idea to try dog walking or checking in on pets, which we are looking into.

My Mom did child care for many years. Here in California the law allowed her to watch her own children and one other family's children without being a licensed provider.

Not sure what the laws are in Mass. We'd have to check it out.

meandmyfamily

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Re: Reader Case Study - What do we focus on?
« Reply #59 on: December 07, 2016, 12:06:59 PM »
Nothing accrues with the ones I have done.  That is different than a furniture deal or even some store credit cards.

waltworks

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Re: Reader Case Study - What do we focus on?
« Reply #60 on: December 07, 2016, 12:28:23 PM »
Get a pack n' play for $30 off CL. Boom, extra crib.

Actually, we just used a pack n' play as a crib the whole time for our own kids. Never could understand why you'd want something ornate/expensive instead of cheap/portable. It's basically a dog crate for a small human, after all.

-W

babybug

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Re: Reader Case Study - What do we focus on?
« Reply #61 on: December 07, 2016, 01:37:17 PM »
The other perk to banks of CC balance transfers is that once you pay it off and start using the CC, the bank earns 1-2% of the transaction from the vendors.

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YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #62 on: December 07, 2016, 03:01:32 PM »
Get a pack n' play for $30 off CL. Boom, extra crib.

Actually, we just used a pack n' play as a crib the whole time for our own kids. Never could understand why you'd want something ornate/expensive instead of cheap/portable. It's basically a dog crate for a small human, after all.

-W

We have both, but haven't used the pack n' play in so long that I'd forgotten about it. Could certainly put it to use again.

Our oldest slept in the pack n' play exclusively, then later the crib was gifted to us so we used it for our youngest.

Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #63 on: December 07, 2016, 04:44:13 PM »
Get a pack n' play for $30 off CL. Boom, extra crib.

Actually, we just used a pack n' play as a crib the whole time for our own kids. Never could understand why you'd want something ornate/expensive instead of cheap/portable. It's basically a dog crate for a small human, after all.

-W
Good tip, Walt! I just found a perfect one for the same price on NextDoor. Didn't have to go far to pick it up, which was nice. Then I found a sheet for it, still in the package, for $1.00 at an estate sale.

YR, I'd suggest that your wife consider newborn babies only. They sleep a lot, aren't mobile, you can carry them easily in a sling and you presumably have all the gear you need. A lot of parents don't want their six-week-old with too many other kids at a regular day care. Wouldn't be surprised if she could charge a premium. I'd also recommend just one at a time. All little kids seem to love babies, so your kids would probably enjoy the experience.
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Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #64 on: December 07, 2016, 04:57:17 PM »
The other perk to banks of CC balance transfers is that once you pay it off and start using the CC, the bank earns 1-2% of the transaction from the vendors.
Oh, that's it! I knew there was a catch but I couldn't remember what it was. A long, long time ago, I considered running up a balance just to take advantage of one of these offers just to help increase my credit score. (Hey, I had a company car and no debt, I had to get creative. Also, no snark please. This was pre-MMM and pre-internet and you had to figure shit out all by yourself in those days.)
I vaguely remember the details, but it went something like this: O% on balance transfers for X amount of time. Some low-ish percent on new purchases (say 7 or 8%). The catch was that the new purchases sat there, accruing interest until the entire amount of the BT was paid off. That's it! They know that people are likely to add to the new line of credit and this prevents them from paying the additional purchases off. Now, that was a long time ago, but banks don't change their tricks much. IIRC, it wasn't really obvious, even in the fine print. I actually remember calling the CC company and asking a lot of questions. Ultimately, I decided it wasn't worth the hassle, but dang, I'm kinda proud of my old brain for dredging this up! Thanks for the tickler, ladybug. I hope it's useful to someone, somewhere. Probably not likely to be anyone on this forum, right?
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babybug

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Re: Reader Case Study - What do we focus on?
« Reply #65 on: December 07, 2016, 05:08:02 PM »
Diane C., I'm not even referring to hidden interest charges to you (the consumer)... I mean every credit card company charges the Merchant (Target, Amazon etc) a Terminal Fee every time you swipe. That's why your Gas station lists a cheaper price for Cash vs CC.

Even if you never carry a balance so you never pay interest or annual fees, the bank collected 1-3.5% for _every_ transaction you did.  The Merchant happily pays it for the increase in sales it gets for accepting CC.

See here:
https://www.valuepenguin.com/what-credit-card-processing-fees-costs


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Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #66 on: December 07, 2016, 06:25:46 PM »
Diane C., I'm not even referring to hidden interest charges to you (the consumer)... I mean every credit card company charges the Merchant (Target, Amazon etc) a Terminal Fee every time you swipe. That's why your Gas station lists a cheaper price for Cash vs CC.

Even if you never carry a balance so you never pay interest or annual fees, the bank collected 1-3.5% for _every_ transaction you did.  The Merchant happily pays it for the increase in sales it gets for accepting CC.

See here:
https://www.valuepenguin.com/what-credit-card-processing-fees-costs

Yeah, babybug, I totally get that, but people paying off balance transfers aren't paying merchant fees, those were levied at the time of purchase, however long ago. The paltry merchant fees are not what the banks are really after. I understood your point completely, I was just thanking you for breaking through the cobwebs in my brain. Bravo!
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YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #67 on: December 07, 2016, 08:21:51 PM »
YR, I'd suggest that your wife consider newborn babies only. They sleep a lot, aren't mobile, you can carry them easily in a sling and you presumably have all the gear you need. A lot of parents don't want their six-week-old with too many other kids at a regular day care. Wouldn't be surprised if she could charge a premium. I'd also recommend just one at a time. All little kids seem to love babies, so your kids would probably enjoy the experience.

Great tip Diane.

Our complex has a message board we can post to for starters. Must be some new moms around here that could use a hand a couple of days a week (for a reasonable fee).

mary w

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Re: Reader Case Study - What do we focus on?
« Reply #68 on: December 08, 2016, 01:20:11 PM »
With regard to doing daycare maybe she would be lucky enough to find someone who needs only part-time care (i.e., someone who works 1-3 days a week or only mornings).  Centers charge much more than 1/2 for 1/2 time care b/c they have to deal with caregiver:child ratios.

Or once your oldest is in school look for someone who just needs an hour or so in the morning until school starts.  Obviously a child who goes you your child's school.   
« Last Edit: December 08, 2016, 01:22:03 PM by mary w »

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #69 on: December 09, 2016, 05:56:48 PM »
With regard to doing daycare maybe she would be lucky enough to find someone who needs only part-time care (i.e., someone who works 1-3 days a week or only mornings).  Centers charge much more than 1/2 for 1/2 time care b/c they have to deal with caregiver:child ratios.

Or once your oldest is in school look for someone who just needs an hour or so in the morning until school starts.  Obviously a child who goes you your child's school.

She's started talking with folks in Facebook groups about some part time opportunities. Also posted on our apartment complex's message board advertising. looking for 3 or fewer days/week to start. more than that could be overwhelming right out of the gate.

Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #70 on: December 15, 2016, 09:14:34 PM »
Hey YR! What happens next? So much progress in one week then radio silence.
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YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #71 on: December 16, 2016, 04:41:44 AM »
Progress has been slow on account of bureaucracy,  so I've been waiting for more news to produce a meatier update.

We've opened the 0% balance transfer card and moved the 2 CC balances over. 12 months on the clock to pay that off.

We wanted to start the auto equity refi of our credit union debt right away, but we needed to transfer our car title to Massachusetts before we can add a lien holder. For some reason this process takes weeks, even with a clean title (currently no lien holders). So we're waiting on this.

In the mean time I was reading the investing tips in the Investor Alley section of the forum and also JL Collins' stocks series and decided to have a look at our retirement account allocations. They'd been on autopilot for years. The allocation was more complicated than it needed to be and performance wasn't great so I decided to invest in vanguard total stock market index funds (VTSAX). However, scottrade requires you to have a advisor through them to buy that index fund. I was unsure how to proceed, so i posted a request for feedback over there (check out http://forum.mrmoneymustache.com/investor-alley/requesting-assistance-with-retirement-accounts/). Feel free to post here or there if you have suggestions.

Mrs. YR decided that she'd rather have a break from child rearing with her side hustle and is instead looking into working with a catering service as a server. I'm totally on board with that. I'd be tired of kids too after a nonstop week of them.

Our apartment lease is up in March, so we're saving cash for the costs of a new cheaper apartment (first and last months rent, security deposit). We're hoping to stay close to where we are for the amenities, but find a place at least $500 cheaper. It's too early to be looking now so we'll start actively searching in January. While we wait, I've been looking through our stuff to see what we can sell. Lots of books, kids toys, and some old video games and movies that can go. Also some boxes of things that weren't unpacked from our last move, so those can definitely go. All proceeds will go toward saving for the costs of the next apartment.

That's about it. Been listening to Mad Fientist podcasts and reading JL Collins' site, in addition to MMM. Trying to contribute in this forum where I can. Progress feels painfully slow, but we're moving in the right direction thanks to everyone's suggestions!

Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #72 on: December 16, 2016, 08:46:03 AM »
Well, it's not often on the road to FIRE that so many huge strides are taken. Normally it's all about the baby steps or even the no steps (i.e. not spending).

I'd caution you not to simplify your investments too much. That other cliche about eggs and baskets is true. Spreading out over a number of asset classes is the wiser move than putting everything in one or two places. I also read an interesting thought on another thread that really stuck with me. The poster felt that his home and his job represented significant chunks of the US economy, so he kept a higher than average percentage in foreign investments. Worth thinking about while you're waiting for other things to happen.

It sounds like your wife wants to get out of the house a bit. My concern is that what she's considering is hard work, it's another layer of effort in addition to her job at home. It requires her to drive to multiple locations, wear specific clothing and is not particularly lucrative. The reason that the one newborn daycare option is so attractive is that she can do it right alongside her regular responsibilities from the comfort of home0. It's not nights and weekends and it pays better. Put another way: babycare lets her get paid for work she's already doing. Much better return for her efforts. Choosing one path does not eliminate the other, so it won't hurt to try the catering gig, but I know it's difficult work.
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YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #73 on: December 16, 2016, 05:36:41 PM »
Catering was one option, serving at a local restaurant could also work. No definite plan yet, but we're both on board with increasing our income. Your point about taking on another kid during the day is well taken. We just hadn't found an opportunity for that yet. Most were in the evening (what I like to call the Hell Hours).

I'm thinking that a 2-3 fund portfolio would be sufficient for us and allow a passive approach. Mostly stocks, some bonds, potentially some international. The argument gets made by Collins and others that the dominant companies in the stock market are multinational and question the benefit of foreign investments. I'm a novice at this and don't possess the knowledge of investing that would allow me to think critically about this. At least not yet (I plan to do more reading). Either way, I think buy and hold is going to be our approach.

dca

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Re: Reader Case Study - What do we focus on?
« Reply #74 on: December 16, 2016, 07:01:13 PM »
The reason that the one newborn daycare option is so attractive is that she can do it right alongside her regular responsibilities from the comfort of home0. It's not nights and weekends and it pays better. Put another way: babycare lets her get paid for work she's already doing. Much better return for her efforts.

Depends on the newborn. Ours screamed all the time and had to either nurse or be carried around. Not enough just to strap him on: you had to WALK because baby had to be IN MOTION in order to feel soothed. He also made ~10 poopy diapers a day then. Can't imagine taking care of other children at the same time. Childcare is hard work. Several mothers I know sent their toddlers to daycare when they had their second.

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #75 on: July 10, 2017, 09:52:32 PM »
It occurred to me that it's been several months since I provided a status update. It's about time I did something about that. Also, we have new questions (assuming you make it to the bottom of this post)!

Thanks to the help of everyone in this thread our situation has improved dramatically. We are now running a monthly income surplus and our debts have been restructured to reduce interest and facilitate their rapid payment. We are on track to knock out our higher interest debts with the year and start saving even more.

I've updated the case study from my OP below and highlighted in bold any values that have changed significantly.

We were able to find a cheaper rental, saving us $400/mo over our previous place.

Our adoption loan debt was refinanced mostly through an auto equity loan to 3.5% with a remainder at 6.99% through a traditional loan. 

Our CC debt was moved to a balance transfer card with a 12 month no interest pay back period.

All of our IRA accounts were transferred to Vanguard and are currently invested in low cost index funds.

We received a sizeable tax refund, thanks to a federal adoption tax credit, that became our emergency fund.

Life Situation: Married Filing Jointly, wife and 2 children (ages 3 and 1.5), 34 living in the North Shore Area of Massachusetts.

Gross Salary/Wages: $70,200 bi-weekly + a yearly profit sharing bonus that is equal to ~35% of my base salary. Wife is raising the kids full-time

Pre-tax deductions: 401k - 10% with 10% employer match

Other Ordinary Income: NA

Qualified Dividends & Long Term Capital Gains: NA

Rental Income, Actual Expenses, and Depreciation: NA

Adjusted Gross Income: $4,446.43/month after taxes and 401k deduction

Taxes (monthly):
Federal: $150.67
State/Local: $220.07
Social Security: $362.94
Medicare: $84.19

Current expenses (this is from last month, need more data):
Rent: $1,700
Utilities: $180 (Gas, Electric, Water/Sewer)
Car Insurance: $50
Internet: $35
Cell phones: $45
Groceries/household goods: $500
Netflix: $11
Fuel/Tolls: $120
Medical (pharmacy, urgent care): $75
Misc: $500 (car maint., clothes, restaurants, etc.)
Balance Transfer Credit Card: $293
Credit Union Loans #1: $242
Credit Union Loans #2: $99
Student Loan: $127.48
Best Buy Credit Card: $27
Total: $3,762.48

Expected ER expenses: NA

Assets:
My ROTH: $8,468.46
Wife’s ROTH: $55,966.28
My IRA: $15,554.97
Wife’s IRA: $49,043.22
Work 401k: $17,796.26
One Car: paid off and worth ~$12,000
Emergency fund: $6,495.98 in savings account
Total: $165,325.17


Liabilities:
Balance Transfer Credit Card: $9,781.85 @ 0% for 12 months (12/2017)
Credit Union Loans #1: $12,235.78 @ %3.5
Credit Union Loans #2: $1,771.79 @ %6.99
Student Loans: $7,478.50 @ %3.28
Best Buy Credit Card: $1,087.73 @ 0% (18 month no interest promotion on washer/dryer purchase)
Total: $32.355.65


New Specific Question(s):
How should we be prioritizing saving for retirement vs. a house vs. college?

Our rent is currently $1,700/mo and according to the NYT rent vs. buy calculator, a $500,000 home price would cost the same as renting over the next 10 years. There are certainly 3br/1ba homes for sale in my area that are significantly cheaper than this (300-400k). Moreover, the market seems to be heating up as people priced out of Boston move north along the commuter line for cheaper rentals/houses. For this reason, both rent and home prices are likely keep going up.

All this is to say that it seems we should be considering a home purchase in the near future since we plan to stay put for the long term. However, I've heard saving for retirement is a pretty important thing to do and providing for the education of kiddos is something people do.

We would be first-time home buyers and aren't familiar with what incentives there are in Mass for folks in our situation. As for savings, you can see our current assets are mostly tied up in retirement accounts so we would be starting effectively from $0. Saving for a 20% down payment on a $400k house starting now at our current savings rate would take a few years and that's without contributing anything to our IRAs or to college savings. I'm aware that I could withdraw some of the principal from our ROTH accounts and I think my 401k allows for a one time loan for a first time home purchase (my naive sense is that these wouldn't be good choices, but I'm often wrong).

Laura33

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Re: Reader Case Study - What do we focus on?
« Reply #76 on: July 11, 2017, 07:16:50 AM »
First, congrats -- that's a big improvement in net worth over a fairly short time.

Second, don't get ahead of yourself.  You still owe almost half of a year's (base) salary.  Get that paid off first.

After that, the question is when do you want to be able to retire?  See http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/.  If you keep saving at a 10% rate, you'll be retiring in about 50 years -- not awesome.  So I would think hard about how long you want to be tied to this job and set your retirement savings based on that date.   

The house purchase then comes with whatever is left over.  But also keep in mind that houses generally have extra expenses, too -- you will need to manage ongoing maintenance, like lawn mowing and leaking pipes, along with savings for long-term improvements, like a new roof.  This is all stuff that is built into your rent, but not into your mortgage.  So don't jump into homeownership without doing a lot more research on how much things really cost and the average lifespan of various components (HVAC, appliances, etc.).

College savings comes last, after you have the other things covered.
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robartsd

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Re: Reader Case Study - What do we focus on?
« Reply #77 on: July 11, 2017, 09:15:03 AM »
I completely agree with Laura that savings for a house needs to come after dealing with debt and figuring out a reasonable (to you) retirement plan. Based on current retirement balances, $7020 in 401k contributions from both yourself and your employer, assumed 5% real growth in retirement accounts, current annual expenses based on your monthly budget (excluding debt service, social security, and medicare), 4% SWR, I estimate that your current retirement savings plan leads to FI in about 24 years (way better than Laura's projection of 50 years - I think she left out current balances and employer match, while also keeping your 13% gross income debt service expense and taxes that only apply to earned income). Congratulations, you're on track retire comfortably a few years ahead of "normal" retirement age. If buying a house is more important to you that retiring any earlier, you can safely divert money currently going to debt service plus any additional surplus to a down payment fund after you pay off your promo rate cards and 6.99% interest loan. Supporting kids in college is nice, but there are many options for them if you cant afford to do so.

If you're looking for ways to cut your expenses and save even more, $500 in "misc" expenses is where I'd look for more savings.

robartsd

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Re: Reader Case Study - What do we focus on?
« Reply #78 on: July 11, 2017, 09:44:13 AM »
500k home purchase being the same cost as 1700 monthly rent over 10 years didn't sound right, so I looked at the buy vs. rent calculator and saw that investment growth rate was set by default to 4%. Adjusting investment interest to up 7%, home and rent apreciation each down to 2%, I get about 350k as equivilent costs to renting at 1700/month.

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #79 on: July 11, 2017, 11:50:13 AM »
Thanks for that dose of reality.

I anticipate the 6.99% loan and intro rate debt will be taken care of by October, which will boost us to $1,103 surplus/mo (~25% of monthly income). I was planning to continue paying the minimums on the 3.5% credit union and 3.28% student loans. From there, the line items that I wanted to tackle were "misc." and housing. I'll focus on misc. for now.

For clarity, $500k for a house was certainly more than I would consider paying. This was simply what the calculator suggested on the default settings. What had me considering buying was my thinking that $1,700/mo actually was costing me more money than owning a home over the long term. Having the crossing point at $350k (which is exactly the price i had in mind) instead of $500k has me rethinking this logic. However, as our kids get older we'll likely need to consider a 3-bedroom apartment (likely $2,000+/mo), which will change the math.

As for when I'd like to retire, I don't have a specific year in mind. When I started this thread I was much more concerned with our hair-on-fire debt as well as reducing spending and maximizing our savings. Once I reached a comfortable savings rate (whatever that could be), I'd give more thought to when I could reasonably retire based on those numbers. Maybe now is the time to hammer out a plan.

Lepetitange3

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Re: Reader Case Study - What do we focus on?
« Reply #80 on: July 11, 2017, 12:04:37 PM »
What's up with the misc?  Do you have a good idea of where it's going every month?  Also the groceries are high given how little your kids are.  Tried Aldis yet?  Costco?  There's another store in New England that's super cheap who's name I've forgotten?

  Also since you're in Boston, you should hit up the Frugalwoods blog if you haven't yet.  They early retired from Boston.  A lot of the older posts are on making a 14k yearly spending plan work in that area.

Bettis

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Re: Reader Case Study - What do we focus on?
« Reply #81 on: July 11, 2017, 01:14:15 PM »
What's up with the misc?  Do you have a good idea of where it's going every month?  Also the groceries are high given how little your kids are.  Tried Aldis yet?  Costco?  There's another store in New England that's super cheap who's name I've forgotten?


I'm in Mass and find Market Basket a whole lot cheaper than the other supermarkets in my area (no Aldi close enough to me), maybe that is the one you are thinking of?  We also have BJs which is a wholesale club but you have to do your homework to ensure a good deal.

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #82 on: July 11, 2017, 01:32:00 PM »
What's up with the misc?  Do you have a good idea of where it's going every month?  Also the groceries are high given how little your kids are.  Tried Aldis yet?  Costco?  There's another store in New England that's super cheap who's name I've forgotten?

  Also since you're in Boston, you should hit up the Frugalwoods blog if you haven't yet.  They early retired from Boston.  A lot of the older posts are on making a 14k yearly spending plan work in that area.

Misc. is a hodge podge of things like fast food stops on mass pike, clothing purchases, ice cream shop stops, tickets for activities, toys, etc. It's likely an overestimate for any give month, but it could still be trimmed. I need to do a more detailed itemization to get a handle on it, but haven't sat down with our CC statement to do it yet. Clearly I should.

For groceries we do most of our shopping through the Peapod delivery service with Stop and Shop. They often have deals, which my wife does a great job of tracking.  Not the most frugal option, but with one family car (which I use to commute), no cheap alternatives in walking/biking distance (1 small neighborhood grocer with limited selection and high prices), and 2 kiddos to haul around, it is the most convenient option. The nearest Aldi's is an hour's drive away in NH. Costco is closer (30 minutes), but we don't have a membership. Not sure of any cheaper options in this area. We have Market Basket, Shaw's, Stop and Shop, Trader Joe's, Target, and CostCo.

Thanks for the suggestion of FrugalWoods. I've heard of them through this site and the MadFientist podcast, but haven't read up on them. Will give it a read!

Lepetitange3

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Re: Reader Case Study - What do we focus on?
« Reply #83 on: July 11, 2017, 02:41:35 PM »
Market basket was it.  I loved stop and shop when I lived in Boston, but it's pricier than other options.

Lady SA

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Re: Reader Case Study - What do we focus on?
« Reply #84 on: July 11, 2017, 02:52:46 PM »
Trader Joe's is pretty great. They have limited selection but good quality for lower prices. I shop at a combination TJs and Aldi's every week (they are owned by the same company).
https://www.earnest.com/invite/lillian2 --> Use this referral to refinance your student loans with Earnest and get a $200 bonus!

wintertell

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Re: Reader Case Study - What do we focus on?
« Reply #85 on: July 11, 2017, 03:45:44 PM »
I read the Frugalwoods blog and they shopped at Market Basket. I believe they also did it on Fridays because of the timing of the sales? You will have to look to see the exact article, but that sounds like a fairly easy change.

I also agree with the above - that it is fine to think ahead, but dealing with the debt is priority #1.

robartsd

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Re: Reader Case Study - What do we focus on?
« Reply #86 on: July 11, 2017, 03:49:10 PM »
A plan to blast 12k+ in debt over 3-4 months is impressive! I agree that at 3.5% you should be looking at other options for your money rather than paying down the debt.

The top result for buy vs rent calculator was from realtor.com. I was not surprised that the assumptions there favored buy (low rate used for opportunity costs - 4%). I was surprised that the NYT calculator favored buy even more (3% appreciation of house, 2.5% inflation of rent, 2% general inflation - realtor.com uses 2% for all thease). Both calculators allow you to open up and adjust the many assumptions.

Of course the $1700/mo rent you're paying is not buying housing equivilent to the $350k house you'd consider buying; so you might concider buying sooner - the math says it's likely to cost about the same if you sell after 10 years (of course most of the savings is in equity for many years beyond unless you sell - taping that equity using loans adds additional expense).

As for when I'd like to retire, I don't have a specific year in mind. When I started this thread I was much more concerned with our hair-on-fire debt as well as reducing spending and maximizing our savings. Once I reached a comfortable savings rate (whatever that could be), I'd give more thought to when I could reasonably retire based on those numbers. Maybe now is the time to hammer out a plan.

Yep, your hair-on-fire debt is smoldering, good job! Of course if you feed it it could flare up in a hurry, so keep up the good work. You have the next 3-4 months to plan how you'll manage your money in the next phase of your financial life. If you're sure you'll want to retire in place, I'd consider saving towards home-ownership; otherwise, I'd work towards maximizing retirement account contributions (it's not that difficult to raid retirement accounts to fund a home purchase if you change your mind later, but you can never make up missed opportunities for retirement account contributions).

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #87 on: July 11, 2017, 06:58:25 PM »
We've shopped market basket in the past. The one nearest us can be a mad house in the evenings (which is when we'd have to go), but the prices are probably the lowest. We are in a promotional period until January with the delivery service where we don't pay for any deliveries, so we'll probably continue using that for some items and shop sales when we can to cut costs.

Profit sharing from my employer is paid in the fall and I'm anticipating it will be enough to cover the $12k in high-interest and promo-rate debt. Any remaining bonus will pad our emergency fund. Once we get ~$15k I think we'll be set there.

I think I've been convinced that focusing on retirement is the way to go right now. It's been several years since we could do that and we really need to get back to it. Our effective federal income tax rate is very low right now (thanks to the adoption credit), and according to the investment order guide this would favor feeding our Roth accounts first.

 

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #88 on: July 11, 2017, 07:28:09 PM »
I also had a deeper look at our miscellaneous expenses. Much of it over the last several months was for new clothes purchases. Many of these purchases were for business casual basics (button-up shirts, chinos, undershirts) for my new job. While some of it was thrifted, our local Savers doesn't have much of a selection in my size (why are so few small-medium people donating?) so much of it was retail, albeit on sale or from outlets. Still, it adds up fast. I think I am set with what I bought so I won't be making more of these purchases for while.

Other chargers were for things like ferry tickets to Boston, the zoo, museums, booze, bike gear, eating out, and buying lunch at work (I brown bag 3-4 days a week). Just gotta find ways to cut back, though I think things like the ferry, zoo, and museums are worth it for the kiddos from time to time. We generally put an emphasis on free things though (e.g. library, parks, beaches).

There are a few thing coming up though that will add some costs though. Both of our phones are 5 years old and in need of replacing (especially my wife's galaxy S3). We also have an out of warranty macbook with a glitchy trackpad and keyboard that needs fixing.

Dicey

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Re: Reader Case Study - What do we focus on?
« Reply #89 on: July 13, 2017, 07:44:29 AM »
Hey YR, it's good to hear from you! Very Impressive Update!

I'm on vacation, so I'm going to keep this brief.

1. The awesome comments posted since your update have offered great advice. Love this community!

2. If you itemize, consider deductibility. Might make sense to prioritize killing the CU loans before the SLs.

3. Grocery and Misc. are still low hanging fruit. I knew the answer was "Market Basket" from reading the FW blog, and I live in CA! Please rethink the "weekends are crazy" POV. Weekends are when the other smart people save money by shopping at MB and Costco. Make a plan, suck it up and save big time.

4. If I didn't recommend "The Complete Tightwad Gazette" Book (blue cover edition) before, I'm recommending it now. It's old and occasionally laughably dated, but the core advice is rock-solid and very suited to your current life situation. Both of you should devour it. I guarantee it will help you answer all of your questions and reach your goals sooner than you ever thought possible.

Congratulations on the amazing progress you've made so far!

I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #90 on: July 13, 2017, 02:00:07 PM »
Hey Dicey!

Didn't recall your handle at first, but a quick reread of my thread got me sorted. Thanks for checking in!

1. The awesome comments posted since your update have offered great advice. Love this community!

Thank you for all the great advice!

2. If you itemize, consider deductibility. Might make sense to prioritize killing the CU loans before the SLs.

We do not itemize our deductions right now and I am pretty sure it wouldn't exceed our current standard deductions. Something to consider though.

3. Grocery and Misc. are still low hanging fruit. I knew the answer was "Market Basket" from reading the FW blog, and I live in CA! Please rethink the "weekends are crazy" POV. Weekends are when the other smart people save money by shopping at MB and Costco. Make a plan, suck it up and save big time.

We'll start with Market Basket. Costco requires a higher activation energy.

4. If I didn't recommend "The Complete Tightwad Gazette" Book (blue cover edition) before, I'm recommending it now. It's old and occasionally laughably dated, but the core advice is rock-solid and very suited to your current life situation. Both of you should devour it. I guarantee it will help you answer all of your questions and reach your goals sooner than you ever thought possible.

You have mentioned TCTG. Mrs. YR read it years ago and I never have. Will put it on my "To Read" list.

Also started reading your journal. You are a gifted raconteur and your stories are addicting stuff! Gotta drag myself away to be productive!


EconDiva

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Re: Reader Case Study - What do we focus on?
« Reply #91 on: July 16, 2017, 12:38:33 PM »
I think you're doing pretty well, including that 10% into 401k. Nice. Agree with previous posters that if you can concentrate on knocking out that CC debt, you have a nice cushion to start saving.

If you love where you live and it works well for your wife home with two little kids, be careful about moving somewhere cheaper to save $200-300/month just for savings' sake. If she can take the kids to the park or library, socialize, get groceries within walking distance of home, there's a big quality of life value to that price.

Taking care of two little kids ages 2 and 1 is a big job. Taking on other kids could be good money, but could also complicate things unnecessarily...additional nap times, your kids' nap times interrupted, more germs/sick kids in the mix, etc.,  so proceed with caution there. In my experience, those little kid years were somewhat all-consuming, but they don't last forever. Enjoy the freedom you've bought yourselves by being generally frugal and careful. Things can change dramatically when the kids hit school age, and savings can accelerate dramatically at that point.

You live in a HCOL area, which means there are people there who are working and will pay a premium for services. How about a side job for your wife checking on a neighbor or two's pets on weekdays? I make $15/pop for dog walks/checks daily, and check two dogs, so bring in $600 cash for going out and getting some exercise daily. Plus it could be fun for the kids. (I found these jobs by putting an ad on craigslist...And $15 might be low for a HCOL area...I've seen $20-30 per check in areas like SF.)

i think you're on the right track. Bravo.

I'm being nosy....$15 for 'each' time you check/walk a pet?

Sorry to derail the thread...I'm working from home and am considering doing this in my apartment building for extra cash....

brooklynmoney

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Re: Reader Case Study - What do we focus on?
« Reply #92 on: July 16, 2017, 08:42:13 PM »
Congrats on progress. Maybe once kids are a little older you will have more freedom to shop other grocery stores. But for perspective my mother is a millionaire and refuses to shop at stop and shop because of the high prices.

YummyRaisins

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Re: Reader Case Study - What do we focus on?
« Reply #93 on: July 16, 2017, 09:27:56 PM »
Agreed on Stop and Shop bring pricier than its competitors. I've gotten that impression the few times I've gone there myself. We wouldn't be buying there if not for the free (for now) delivery option. That and I'm sure our kids would rather go to Costco if only they knew about the free samples.