Life Situation:
The SO and I are expecting our first child in October. We have already made the decision that my wife is going to be the “stay at home parent,” but she has found a gig working part time at a local university and will begin that in 2016. I would not say we have been living mustachian, but I have always been conscious of our spending. My SO is also onboard due to the fact that she is not bringing in any income. We are married, fling taxes jointly, and will have 1 dependent before the end of 2015.
Gross Salary/Wages:
$67,000 - my wages, before taxes. My SO would be bringing in $1,519.62 per month after tax – not sure exactly what it is before tax
Pre-tax deductions:
401K 8% $5,360 – no pre-tax deductions for my wife as there are no benefits with her part time gig.
Other Ordinary Income, Qualified Dividends & Long Term Capital Gains, Rental Income, Actual Expenses, and Depreciation
None.
After Tax Income:
$64,354.16 - $5362.85/month
FUTURE Anticipated Expenses
First time parents – so no idea what this expense is going to be.
SAVINGS/ PAYING OURSELVES FIRST: $1,809.33
Retirement (Roth IRA) $ 916 (maximum contribution, to my Roth IRA and wife’s Roth IRA)
401K $893.33 with 8% contribution from myself and 8% company match from my $67,000 salary (this is the maximum match for my company).
TOTAL FIXED HOUSING BUDGET: $ 2,005.40
Mortgage (P&I) $ 987.36
Escrow T/I $ 456.57
Cable/Internet $ 155.39
HOA 83.33
City Taxes 35.00
Utilities gas/electric (annual average) $ 170
Water/Garbage (annual average) $70
Security System Monitoring $47.75
TOTAL FIXED OTHER BUDGET: $ 369.68
Car Insurance/Jewelry Insurance $ 167.04
Cell phone $ 110
Life Insurance mine/wife – LTD for me $92.64
TOTAL VARIABLE BUDGET: $ 620
Food $ 500
Gas $ 120
TOTAL PERSONAL ALLOWANCES: $ 200
Me $ 100
Wife $ 100
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TOTAL ACTUAL EXPENSES $3,195.08
INCOME MINUS ACTUAL EXPENSES $1,755.24
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NOTES:
My wife and I planned our young cub, so last year during my company’s healthcare enrollment I opted for the Low Deducible/High Out of Paycheck option as I figured the doctor visits/birth/hospital would satisfy the out of pocket maximum (which is ~$4,225 of which we only have ~$1,500 left as the baby is due next month). So I only have $1,500 left out of pocket before the company covers 100%. With this health plan $101.42 is removed from my paycheck every other week so basically $202.84 for the month or $2,434.08 for the year. With this option the company also provides an HRA and funds ~$900 each year
We currently do not have Roth IRA's open at this moment, but plan to open and fully fund by the EOY.
Through looking at my budget that are expenses such as cable/internet that I know we can reduce. We have the “whatever bundle package” deal they have at the time and basically watch 10 channels of the over 250 they provide. The next is the home monitoring system, but they got us on a 5 year contract when they built our house for running all the wiring for free (there is 2 years left on this). The other expenses are possibly Home/Car/Jewelry insurance?
Other note is that I completed my Masters in Business Administration program 3 weeks ago. This program was completely paid for through my company – although they have a 4 year retainer on me. So hopefully this will help me in my career until I can retire.
Assets
Total of $27,208 sitting in cash at the moment.
My 401K totaling $32,741.
2 cars that are completely paid off and are no older than 3 years old. 1 is a 2012 volkswagen jetta SE and the other is a 2013 Honda CRV Eco.
We built our home a little over 3 years ago and is worth an estimated $275k; we've still got a lot of mortgage on it (below), but put down 20% to avoid PMI. It is energy efficient as it is basically a brand new home and energy star certified.
Liabilities
We have ~$188k left on our mortgage at 4.25%. No PMI, but we took out a 30 year loan when built it a couple years ago (way before I found this blog), but we should not have to buy another house until our children have left the nest, unless we wanted to move me close to work as we are 19 miles away right now and the HOA is pretty ridiculous at $250/quarter.
No student loans.
No consumer debt.
Specific Question(s):
1) What would you do in our situation with $27,208 sitting in cash with no debt besides mortgage?
2) Should we re-finance our house to a 15 year mortgage?
2) Employee max contribution is $18K per year – should I max this out? I am already at the maximum for company match.
3) What else should we be doing differently? Feel free to bring out the face punches!
Ready... set... go!
Edit: Security cancellation is $985, but would save us $400 over the next 2 years and 5 months payments of $47.75.
Updated question: Should I just max out my 401K and invest the rest after tax in a taxable account? Roth vs Traditional?