Author Topic: Guidance  (Read 3597 times)

clifford4970

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Guidance
« on: June 02, 2015, 01:26:53 PM »
Hello,
I am a married 26 year old man.  This upcoming Fall Semester will be my last as I will be graduating in December.  My Wife will graduate college next Summer.  We have two cars that are paid for (I bought a new one before stumbling upon MMM, paid it off in 3 years).  We have zero debt and zero student loans.  We have paid out of pocket for our schooling (this has added a few extra semesters since it is hard to fit school around a full time work schedule).  We were afraid we were going to have to take out student loans, but luckily my parents have an empty upstairs and offered us free rent for a year (little embarrassed to admit that).
I have worked at the same company for 5 years and have been doing a 401K for the last 4.  They match up to three, and half up to 5.  So I put in 5% and they contribute 4%.  I just recently started a Betterment Account and have $50 a week going into that (2600 annually).  I have 1000 going into savings each month, and the rest of what we makes goes to Groceries, Gas, Car Insurance, Phone Bills and the almighty Tuition (Tuition is anywhere between $14k and $20k each year).
The goal is to just save as much as we can so we can buy a house when we leave my parent's home next spring.
I guess I have a few questions, should I up my 401k contribution even if they aren't matching it?  Should I put less in savings and more into my Betterment account?  And I guess, should I be doing anything differently?  I know that is hard to tell because you don't know me, and I have not told you everything you need to know, but I guess I am just wondering what am I doing right, and what can be done better/different.


cheapbutchic

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Re: Guidance
« Reply #1 on: June 02, 2015, 01:33:48 PM »
I cannot give you any financial advice but I would just love to tell you that if you were my son I'd be incredibly proud of you.  At 26 handling your own student loans and saving money and establishing a good work ethic.  Nothing to be embarrassed about living with your parents.  Great job!

clifford4970

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Re: Guidance
« Reply #2 on: June 02, 2015, 01:35:47 PM »
Well thank you very much.  That is much appreciated :)

anneinpdx

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Re: Guidance
« Reply #3 on: June 02, 2015, 01:47:00 PM »
Can you post a few more details about your salary?  I think you would most likely benefit from upping your 401k contributions before starting a taxable account.  Or possibly a ROTH if your income/taxes are on the low side?  If you add a bit of detail it would help.  And good job on avoiding the student loans!  (I wish I had done as well)

MDM

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Re: Guidance
« Reply #4 on: June 02, 2015, 01:54:00 PM »
Can you post a few more details about your salary?  I think you would most likely benefit from upping your 401k contributions before starting a taxable account.  Or possibly a ROTH if your income/taxes are on the low side?  If you add a bit of detail it would help.  And good job on avoiding the student loans!  (I wish I had done as well)
+1 to all the above.

Also, unless you know for sure that you will be living in a particular area for many years after you both graduate and are very familiar with the various neighborhoods in that area, renting for a year or three or more could be better than buying a house in haste and repenting at leisure.

clifford4970

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Re: Guidance
« Reply #5 on: June 02, 2015, 02:24:04 PM »
I can certainly do that.

I currently make just above $36,000 a year.  My wife makes about $20,000.  Of course after taxes, 401k contributions and health insurance we see about $42,000.
Current Monthly Expenses-
Phone - $60 for two phones
Car Insurance - $125
Gym Memberships - $40 for two passes
Tithing - Comes out to about $400 a month
Gas - $240
Groceries - $300
School - Each Semester is $3500 plus books.  My wife and I both did Spring, We are currently doing Summer and will both be going in Fall (Total 2015 Roughly- $22,000)

And to MDM, we would both like to stay in our Current Location (Idaho), but we have discussed the possibility of moving when both are done with college for different jobs.  So I can see exactly where you are coming from.

Please let me know if you would like any additional information that I may have left out.

anneinpdx

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Re: Guidance
« Reply #6 on: June 02, 2015, 03:14:00 PM »
You will probably get some better information from posters with more knowledge about finance optimization in this bracket. We have higher income (but also much higher costs). It looks like your tax burden is probably fairly low (especially if you can take Education credits for your schooling expenses) so you may want to play around with some tax planning calculators to decide if you want to take the small tax hit now and go Roth or pad your 401k more.  I'd do either of these before adding to a taxable account. Mad Fientist has some good posts on how this can accelerate FI.  I'm sure others will chime in with even better info. 

MDM

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Re: Guidance
« Reply #7 on: June 02, 2015, 10:00:17 PM »
It looks like your tax burden is probably fairly low (especially if you can take Education credits for your schooling expenses) so you may want to play around with some tax planning calculators to decide if you want to take the small tax hit now and go Roth or pad your 401k more.  I'd do either of these before adding to a taxable account.
+1

It is likely that Roth will be better for you now, based on the assumption that your current marginal rate is as low as it ever will be.  If that assumption is incorrect, so might be the Roth choice.

One significant wildcard is the saver's credit.  If you contribute enough to traditional plans to get your AGI below $36K you will likely pay $0 federal tax (and reduce your state tax as well).  You should calculate your effective marginal rate as (tax saved, including credit)/(traditional amount contributed).

You could look at one or more of the following to evaluate 2015 projections:
http://www.paycheckcity.com/calculator/salary/ or
http://www.bankrate.com/calculators/tax-planning/1040-form-tax-calculator.aspx or
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ or
the reader case study spreadsheet.  I know the last one has 2015 tables - make sure whatever you use does.

mxt0133

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Re: Guidance
« Reply #8 on: June 02, 2015, 10:23:56 PM »
Please tell me that you have been taking advantage of the Lifetime learning credit http://www.irs.gov/publications/p970/ch03.html or American Opportunity Tax Credit http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers

Great job and if you have a good relationship with your parents I would take them up on that offer to live rent free for a year.  I hope you contribute enough in household chores and help to not be a burden on them.


clifford4970

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Re: Guidance
« Reply #9 on: June 03, 2015, 09:12:17 AM »
Please tell me that you have been taking advantage of the Lifetime learning credit http://www.irs.gov/publications/p970/ch03.html or American Opportunity Tax Credit http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers

Great job and if you have a good relationship with your parents I would take them up on that offer to live rent free for a year.  I hope you contribute enough in household chores and help to not be a burden on them.

We are taking advantage of the American Opportunity Tax Credit, that always helps and makes our tax refunds much nicer.
And we do have a good relationship with my parents and have already moved in.  And my dad always kept me busy with work as a kid, and it has been no different since moving back in.  I think they enjoy the house cleaning and yard crew ;)