Author Topic: Update: Case Study-Am I Crazy!  (Read 3379 times)

mtnbikes

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Update: Case Study-Am I Crazy!
« on: September 18, 2015, 09:30:13 AM »
Hi Everyone,

I wanted to provide an update and receive more advice about our plan (see below). My biggest concern if we choose to move would be the lost income from DW job. Since March 2015 when I first posted this case study we sold the RV and paid off the line of credit. We are on track to have all debt paid off, except the mortgage, by June 2016. We are paying $5000-6000 per month towards our debt. Also, does it make more sense to pay off student loan first and then start saving more or pay some towards student loan and save a larger percentage. Thanks!

My wife (DW) and I (DH) would like to make a change in 2 to 3 years in order to spend more quality time with family, simplify our life, enjoy our hobbies more often, and escape the climate here in Minnesota. We also have three children ages 9, 7, and 2.5. We are leaning towards Colorado since I used to live there and find the climate conducive to our desired lifestyle. In addition, we have friends living there that could help us with the process of relocating. Our goal is for DW to retire in 2 to 3 years, move to Colorado, and I would work full time in my current profession.

Professions:
DH(44): A full time RN.
DW(42): A full time police sergeant.

Income & Benefits (monthly):
Combined gross income: $12,500
Combined net income: $10,000
The difference is from health ins, deferred comp, pension, and taxes.

Future Pensions:
DW: $4,000-$4,500 monthly       DH: $1,200-1,500 monthly

Assets:
House      $305,000
Savings      $6000
MNDCP(Fidelity)   $130,000
WROS (Fidelity)   $88,000
SEP(Fidelity)   $35,000
Roth(Fidelity)   $3,600
tIRA(Fidelity)   $5,600
403b(Fidelity)   $1200

Liabilities:
House      $175,000 (3.62% refi last fall to 15 yr loan)
Student Loan   $50,000 (4.25%)
Credit Card   $10,000 (0%) Basement project
RV         $0 (SOLD)
Line of Credit   $0 (PAID IN FULL)

Budgeted Expenses (monthly):
Cash         $50
Clothing      $80
Dry Cleaning   $20
Food         $800
Housing      $150
Medical      $25
Personal      $110
Recreation      $100
Transportation   $490
Utilities      $355
Liabilities      $2,175
TOTAL      $4,355   

 

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3187
  • Location: State: Denial
Re: Update: Case Study-Am I Crazy!
« Reply #1 on: September 18, 2015, 09:37:48 AM »
To be honest, it looks like you're on the right track--nothing about your budget jumps out at me as being particularly facepunch-worthy.  What's the "liabilities" line item in your budget?  And how does that differ with the $5-6k you're plowing into debt repayment?

mtnbikes

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Update: Case Study-Am I Crazy!
« Reply #2 on: September 18, 2015, 09:42:24 AM »
Liabilities line is the house payment of $1664.17 (mortgage, taxes, insurance) and the base payment for student loan of $511.37. The $5000-6000 is all extra cash we have at the end of the month.

Gerard

  • Handlebar Stache
  • *****
  • Posts: 1389
  • Location: eastern canada
Re: Update: Case Study-Am I Crazy!
« Reply #3 on: September 18, 2015, 09:47:38 AM »
Your food costs seem high, and "cash" is a method, not a purchase, but really, you're so rich that you don't need to sweat the small stuff unless doing so brings you intellectual pleasure.

mtnbikes

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Update: Case Study-Am I Crazy!
« Reply #4 on: September 18, 2015, 09:54:57 AM »
"Food costs" is combined groceries and eating out. We are a family of five, so it's difficult to lower that number. We eat out maybe once per month, so that true "food costs" amount is closer to $700

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3187
  • Location: State: Denial
Re: Update: Case Study-Am I Crazy!
« Reply #5 on: September 18, 2015, 12:04:12 PM »
"Food costs" is combined groceries and eating out. We are a family of five, so it's difficult to lower that number. We eat out maybe once per month, so that true "food costs" amount is closer to $700
Yeah, we're a family of 8 and we spend about $900-1100/mo on food (depending on how many Fridays there are, when DW goes grocery shopping), so I'm not terribly bothered by that amount.

Honestly, I think you're in a pretty darn good spot.  Your non-house-payment monthly expenses are <25% of your take-home pay.  Something like 70% of your take-home pay is going towards increasing your net worth (either paying down loans or saving for retirement).  Every year, you're saving enough to pay for two years of retirement without even accounting for investment returns or saved interest on debt!  You're doing well.

If I were in your shoes, I'd 1) maximize pre-tax 401k contributions, if that's available, 2a) if AGI is below the IRA phaseout limit, max traditional IRA contributions, 2b) if income is still too high for the tIRA deduction, plow it into a Roth, and if there's money left, 3) pay off that student loan debt.

mtnbikes

  • 5 O'Clock Shadow
  • *
  • Posts: 28
Re: Update: Case Study-Am I Crazy!
« Reply #6 on: September 18, 2015, 12:36:57 PM »
Thanks zolo...for the advice. The credit card will be paid off next month then it's just the snowball into the student loan. You're right though...I need to step up the savings in my accounts and not put all the cash excess towards the student loans.

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3187
  • Location: State: Denial
Re: Update: Case Study-Am I Crazy!
« Reply #7 on: September 18, 2015, 01:38:20 PM »
Thanks zolo...for the advice. The credit card will be paid off next month then it's just the snowball into the student loan. You're right though...I need to step up the savings in my accounts and not put all the cash excess towards the student loans.
To be honest, I'm usually in the "get out of debt first" crowd.  But I'm also a "get out of the high tax bracket" crowd, too. :)  Given your high income, you need to do everything you can to reduce your taxable income.  Assuming your yearly spending is the same in retirement as now (<$30k, and without kids, that grocery bill should go down), and tax brackets stay the same-ish, you'll definitely be in the 15% bracket, if not the 10%.  So any pre-tax investments you make now will get you an immediate 15% return, plus the normal market returns.

Epry123

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: Update: Case Study-Am I Crazy!
« Reply #8 on: September 18, 2015, 01:49:53 PM »
No real advice but Minnesota here too where abouts?