Author Topic: What would you do with $50,000 extra a year?  (Read 1752 times)

appleguy

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What would you do with $50,000 extra a year?
« on: August 03, 2020, 11:59:31 PM »
I work as a software engineer. My wife is a teacher, combined we make about $195,000. We're in the Denver, Colorado area.

Here's a typical month for us in bills:

Mortgage (3.5% interest) & HOA: ~$1600
Power: $100
Car Insurance: $190 (2 paid off cars and a bunch of speeding tickets... :) )
TV/Internet: $170
Life Insurance: $106
Heating Gas: $20
Cell phones: $170
Water / Sewer: $50
Health Insurance (For me): $400
House Cleaner(weekly): $300
Physical Therapy for the wife: $400 (on going, will not be getting rid of this ever)
College fund: $500
Groceries: $300

Monthly Expenses about $4300 including the kids college fund. Add another $1200 for tithing to our church, which brings us to about $5500.

Monthly income for me is between $8000-$9000 and $2500 for the wife. Total is $10,000 - 11,000; I'm a W2 hourly contractor... thus the flux in income.

What you don't see:
$1250 going to Roth 401k; sadly can only do Fidelity Funds (Index)
$100-500 or more to resturants (I get tired of cooking and my wife hates cooking)
$100 ish on subscriptions: spotify, netflix, baby book club, panera coffee unlimited
$200 ish a month on stitch fix

Between retirement accounts, savings etc... our liquid net worth is over $100,000.

If you factor in retirement we have about $50,000 a year of money to play with. Here's our current plan / break down:

$5000 to kids college fund (Taxable Index fund, not a 529 plan; I thought those were to restrictive if he chose not to do the college thing)
$15,000 to retirement
$20,000 to savings this year so we have a better cushion esp with covid and unknowns with my job and her school.
$10,000 to home improvement. That takes care of our fancy pants new deck and fence.

We're starting next year planning, looking for input on:
- Cutting costs:
* Eating out for less; we're cutting down to once a week
* Cell phone bill
* Cable / Internet (I have to have the best possible internet, I'm a remote worker from home)
- Investing in 2021
* What should we be considering?
* Neither of us wants the hassle of rental properties
* Any missed oppertunties?


SwordGuy

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Re: What would you do with $50,000 extra a year?
« Reply #1 on: August 04, 2020, 05:20:48 AM »
With that income and a prodigious savings rate you'll be FI in a fairly quick timeframe.

HSA (Health Savings Accounts) are one way to cut taxes and save for future medical bills.  And if you never need to spend them on medicine, they end up being tax free in your 60s.

use2betrix

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Re: What would you do with $50,000 extra a year?
« Reply #2 on: August 04, 2020, 06:38:30 AM »
I know discussing tithing is taboo around here, but have you considered donating your time instead of money? It could be assisting at a local food bank, homeless shelter, animal shelter, volunteering at church, etc. You could save an extra $200k or so over the next decade if you found ways you could donate your time in an amount that would seem fitting to you.

terran

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Re: What would you do with $50,000 extra a year?
« Reply #3 on: August 04, 2020, 07:06:42 AM »
Nothing wrong with Fidelity index funds. Many of them are actually lower fee than the Vanguard equivalent. At your income I would be contributing to traditional not Roth 401(k).

Check out Red Pocket for cell phones. We each have the 100mb/100text/500mb plan for only $5/month, which does require being careful to use wifi most of the time and using google voice for calls when we can, but they have a number of larger plans that would also be a savings compared to what you're spending.

You might find you can get away with a lower internet tier. My wife spends much of her day on video calls without a problem on our 10 Mbps internet. Then again one of her coworkers a few miles away has problems on a higher speed tier plan from the same company, so there must be other factors at play.

As far as what/where to invest, check the recommended investment order sticky in the Investor Alley part of the forum. Make sure you're maxing out all tax advantaged accounts.

Pigeon

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Re: What would you do with $50,000 extra a year?
« Reply #4 on: August 04, 2020, 07:23:52 AM »
I suspect you are missing a lot of things in your expenses or else you are more disciplined than most.  Clothing, gifts, non-grocery shopping.  Do you really only spend $20/mo on heating all year round?  You mention college fund.  Is that for actual kids or future kids?  If the former, do you spend nothing on them?

slappy

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Re: What would you do with $50,000 extra a year?
« Reply #5 on: August 04, 2020, 10:53:49 AM »
Nothing wrong with Fidelity index funds. Many of them are actually lower fee than the Vanguard equivalent. At your income I would be contributing to traditional not Roth 401(k).

Check out Red Pocket for cell phones. We each have the 100mb/100text/500mb plan for only $5/month, which does require being careful to use wifi most of the time and using google voice for calls when we can, but they have a number of larger plans that would also be a savings compared to what you're spending.

You might find you can get away with a lower internet tier. My wife spends much of her day on video calls without a problem on our 10 Mbps internet. Then again one of her coworkers a few miles away has problems on a higher speed tier plan from the same company, so there must be other factors at play.

As far as what/where to invest, check the recommended investment order sticky in the Investor Alley part of the forum. Make sure you're maxing out all tax advantaged accounts.

What is this blasphemy? Vanguard or bust! /s

ixtap

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Re: What would you do with $50,000 extra a year?
« Reply #6 on: August 04, 2020, 11:29:36 AM »
Have you taken advantage of everything your workplace offers? You show between two workers you are not even contributing one maximum to retirement. As a teacher, your wife may have many options that you didn't even look at when she started working, but make sense now that y'all are earning more. Does your health plan allow for HSA? If not, is an FSA appropriate for your family?

Is $195k gross? If so, you could probably both contribute to Roth IRAs. You can use what you would have put into your EF for this, as you will have access to the contributions if you need them. If the $195k is adjusted, it might be time to switch to traditional 401k to have access to the Roth IRA for your EF.

How much of your cable bill is TV vs internet. If you cut the TV, can you meet your needs for less with streaming?

Does your mortgage include PITI? If not, you haven't included taxes and insurance in your budget.

How many cell phones does $170 get you?! We pay $30/mo for two phones, with 3GB each. The phones themselves tend to be around $200 every 3-4 years, so you could annualize them at another $10/mo.

How important is the house cleaning to you? If the kids are old enough for cell phones, they are old enough to clean.

If someone needs PT, they need PT. However, have you looked closely at all of your insurance options to verify that you are maximizing benefits, as well as minimizing premiums? Is the PT so specialized that she couldn't explore other options that might save money? DH gets more out of Iyengar Yoga than ongoing PT, even though he did need PT to get mobile again. If this is something worth exploring (and I have no idea if it is appropriate or not in her case), you will spend more up front to explore the different options while continuing PT.

How does your water bill compare locally? If it is high, learn water conservation methods. "If it's yellow, let it mellow" can make a big difference when you work from home.

Groceries: already impressive for a family! I spend that every two weeks for the two of us these days, but lamb and seafood are so delicious.

Will your car insurance reduce your rates if the offending driver takes a defensive driving course? Will your state reduce your points if you take a defensive driving course, which might allow you to switch to cheaper insurance?


Fuzz

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Re: What would you do with $50,000 extra a year?
« Reply #7 on: August 04, 2020, 11:41:50 AM »
If your liquid net worth is over $100K, then I don't see the need for a 20K e-fund contribution. Seriously, just put the money in a bond fund. What kind of emergency is going to require you to come up with 20K plus immediately? And if it's a true emergency, you're going sell stocks/bonds even if it's at a loss and use your HELOC too. I don't get big cash e-funds.

Also, on your insurance. My take: lots of speeding tickets are not that cool. How much did you shop that? State Farm is going to rip you off. You should probably have a 500K policy, if you have assets and like to speed. What about disability insurance? Term life?

Is FIRE the goal? I don't think this is a hard question. Just save the 50K/year, which is about 25% of your gross, and keep ordering takeout if that makes the wife happy :)


slappy

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Re: What would you do with $50,000 extra a year?
« Reply #8 on: August 04, 2020, 11:46:55 AM »
You don't have to answer this at all, but for the PT-why is so ongoing that it's never going to end? I always thought PT was supposed to be a temporary solution. Is there any way that the visits can be reduced by having your wife learn some of the exercises to do on her own? Maybe a cash discount for paying for the year in full? I don't much about PT, and I'm sure it's possible your wife has some sort of health condition that requires PT to be ongoing. It's just one thing that jumped out at me. Food for thought, but like I said, you don't owe me an explanation, particularly if it's a personal, health related thing.

I do feel like some things are missing from this "budget". You could look into doing a case study.

v8rx7guy

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Re: What would you do with $50,000 extra a year?
« Reply #9 on: August 04, 2020, 12:04:56 PM »
What is the breakdown of the house cleaner $300 weekly?  Around here, house cleaners charge about $25/hr, my wife that does house cleaning on the side usually spends about 3 hours/wk for households that have two working spouses.  That's really the biggest standout as unreasonable to me at quick glance.  Congrats though, you are in a very good position.

Edit: I am now re-reading and thinking that you possibly mean that you are getting house cleanings weekly for a total of $300/mo .  Which would seem much more "normal" to me.
« Last Edit: August 04, 2020, 12:06:55 PM by v8rx7guy »

slappy

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Re: What would you do with $50,000 extra a year?
« Reply #10 on: August 04, 2020, 01:24:01 PM »
What is the breakdown of the house cleaner $300 weekly?  Around here, house cleaners charge about $25/hr, my wife that does house cleaning on the side usually spends about 3 hours/wk for households that have two working spouses.  That's really the biggest standout as unreasonable to me at quick glance.  Congrats though, you are in a very good position.

Edit: I am now re-reading and thinking that you possibly mean that you are getting house cleanings weekly for a total of $300/mo .  Which would seem much more "normal" to me.

I thought this at first too! I was thinking $300 a week?!?!? Do they live in a mansion? Then, like you, I realized it was $300 a month for weekly cleaning. Still maybe a bit high, mainly because I'm wondering if they actually need it every week. If they cut down to every other week, it could save some money, even if they had pay for a deeper cleaner each time. So in your example, rather than 3 hours each time, maybe they pay for 4 hours each time and then skip the next week. I have no idea if that's even possible. They may have a contract or something. Like you said, it was something that jumped out at me at first too.

SimpleCycle

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Re: What would you do with $50,000 extra a year?
« Reply #11 on: August 04, 2020, 01:54:51 PM »
How old is the kid?  I don't see any kid expenses except one of the subscriptions.  Also, zero travel, which could be true or an oversight.  I'd track your actual expenses to get a better handle on things.

I agree with the feedback that you are probably better off with traditional rather than Roth 401k.  I'd max all your available tax deferred options and then invest in a taxable account.

MilesTeg

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Re: What would you do with $50,000 extra a year?
« Reply #12 on: August 04, 2020, 02:28:37 PM »
I work as a software engineer. My wife is a teacher, combined we make about $195,000. We're in the Denver, Colorado area.

Here's a typical month for us in bills:

Mortgage (3.5% interest) & HOA: ~$1600
Power: $100
Car Insurance: $190 (2 paid off cars and a bunch of speeding tickets... :) )
TV/Internet: $170
Life Insurance: $106
Heating Gas: $20
Cell phones: $170
Water / Sewer: $50
Health Insurance (For me): $400
House Cleaner(weekly): $300
Physical Therapy for the wife: $400 (on going, will not be getting rid of this ever)
College fund: $500
Groceries: $300

Monthly Expenses about $4300 including the kids college fund. Add another $1200 for tithing to our church, which brings us to about $5500.

Monthly income for me is between $8000-$9000 and $2500 for the wife. Total is $10,000 - 11,000; I'm a W2 hourly contractor... thus the flux in income.

What you don't see:
$1250 going to Roth 401k; sadly can only do Fidelity Funds (Index)
$100-500 or more to resturants (I get tired of cooking and my wife hates cooking)
$100 ish on subscriptions: spotify, netflix, baby book club, panera coffee unlimited
$200 ish a month on stitch fix

Between retirement accounts, savings etc... our liquid net worth is over $100,000.

If you factor in retirement we have about $50,000 a year of money to play with. Here's our current plan / break down:

$5000 to kids college fund (Taxable Index fund, not a 529 plan; I thought those were to restrictive if he chose not to do the college thing)
$15,000 to retirement
$20,000 to savings this year so we have a better cushion esp with covid and unknowns with my job and her school.
$10,000 to home improvement. That takes care of our fancy pants new deck and fence.

We're starting next year planning, looking for input on:
- Cutting costs:
* Eating out for less; we're cutting down to once a week
* Cell phone bill
* Cable / Internet (I have to have the best possible internet, I'm a remote worker from home)
- Investing in 2021
* What should we be considering?
* Neither of us wants the hassle of rental properties
* Any missed oppertunties?

In all seriousness,  exchange a new car every year and put the remaining in investments. Something really fun to drive changed out every year would cost about 10-15k a year. Plenty left over with your very high income.

Or whatever else floats your boat to do while you are young  Can't take it with you.

appleguy

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Re: What would you do with $50,000 extra a year?
« Reply #13 on: August 04, 2020, 03:14:29 PM »
What is the breakdown of the house cleaner $300 weekly?  Around here, house cleaners charge about $25/hr, my wife that does house cleaning on the side usually spends about 3 hours/wk for households that have two working spouses.  That's really the biggest standout as unreasonable to me at quick glance.  Congrats though, you are in a very good position.

Edit: I am now re-reading and thinking that you possibly mean that you are getting house cleanings weekly for a total of $300/mo .  Which would seem much more "normal" to me.

4 cleanings a month for $300. I get two cleaners who do everything household except laundry and cook :)
I thought this at first too! I was thinking $300 a week?!?!? Do they live in a mansion? Then, like you, I realized it was $300 a month for weekly cleaning. Still maybe a bit high, mainly because I'm wondering if they actually need it every week. If they cut down to every other week, it could save some money, even if they had pay for a deeper cleaner each time. So in your example, rather than 3 hours each time, maybe they pay for 4 hours each time and then skip the next week. I have no idea if that's even possible. They may have a contract or something. Like you said, it was something that jumped out at me at first too.

appleguy

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Re: What would you do with $50,000 extra a year?
« Reply #14 on: August 04, 2020, 03:16:16 PM »
You don't have to answer this at all, but for the PT-why is so ongoing that it's never going to end? I always thought PT was supposed to be a temporary solution. Is there any way that the visits can be reduced by having your wife learn some of the exercises to do on her own? Maybe a cash discount for paying for the year in full? I don't much about PT, and I'm sure it's possible your wife has some sort of health condition that requires PT to be ongoing. It's just one thing that jumped out at me. Food for thought, but like I said, you don't owe me an explanation, particularly if it's a personal, health related thing.

I do feel like some things are missing from this "budget". You could look into doing a case study.

It's more like "PT"; meaning its a combo of pilates, yoga, rolfing, massage etc... She has a permanent physical disability; therefore these help with pain management and life style. Insurance covers about 5 real PT appointments and those have F$%#@ed her up more then helped

ixtap

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Re: What would you do with $50,000 extra a year?
« Reply #15 on: August 04, 2020, 03:16:55 PM »

In all seriousness,  exchange a new car every year and put the remaining in investments. Something really fun to drive changed out every year would cost about 10-15k a year. Plenty left over with your very high income.


That is a very funny way to cut down on expenses.

appleguy

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Re: What would you do with $50,000 extra a year?
« Reply #16 on: August 04, 2020, 03:23:09 PM »
If your liquid net worth is over $100K, then I don't see the need for a 20K e-fund contribution. Seriously, just put the money in a bond fund. What kind of emergency is going to require you to come up with 20K plus immediately? And if it's a true emergency, you're going sell stocks/bonds even if it's at a loss and use your HELOC too. I don't get big cash e-funds.

Also, on your insurance. My take: lots of speeding tickets are not that cool. How much did you shop that? State Farm is going to rip you off. You should probably have a 500K policy, if you have assets and like to speed. What about disability insurance? Term life?

Is FIRE the goal? I don't think this is a hard question. Just save the 50K/year, which is about 25% of your gross, and keep ordering takeout if that makes the wife happy :)

FIRE is not the goal. We have term life and get all the disability, health etc.. from work. Speeding tickets are atleast 2 years old but seem to continue to nail us with USAA.

We have about $50,000 in savings, will have another $15,000 by the end of the year. I figure this will cover us both unemployed with no change in lifestyle for atleast 1 year.

With that income and a prodigious savings rate you'll be FI in a fairly quick timeframe.

HSA (Health Savings Accounts) are one way to cut taxes and save for future medical bills.  And if you never need to spend them on medicine, they end up being tax free in your 60s.

Can you get an HSA for a market place plan that is not a High Deducitable?

I know discussing tithing is taboo around here, but have you considered donating your time instead of money? It could be assisting at a local food bank, homeless shelter, animal shelter, volunteering at church, etc. You could save an extra $200k or so over the next decade if you found ways you could donate your time in an amount that would seem fitting to you.

It's not an instead of operation. Its in addition; and pre covid, we did. With Covid we're at risk...

I suspect you are missing a lot of things in your expenses or else you are more disciplined than most.  Clothing, gifts, non-grocery shopping.  Do you really only spend $20/mo on heating all year round?  You mention college fund.  Is that for actual kids or future kids?  If the former, do you spend nothing on them?

We have a 1 yearold. He eats some food, diapers are cheap like $30 a month. Most baby expenses are really cheap and not worth tracking.

Have you taken advantage of everything your workplace offers? You show between two workers you are not even contributing one maximum to retirement. As a teacher, your wife may have many options that you didn't even look at when she started working, but make sense now that y'all are earning more. Does your health plan allow for HSA? If not, is an FSA appropriate for your family?

Is $195k gross? If so, you could probably both contribute to Roth IRAs. You can use what you would have put into your EF for this, as you will have access to the contributions if you need them. If the $195k is adjusted, it might be time to switch to traditional 401k to have access to the Roth IRA for your EF.

How much of your cable bill is TV vs internet. If you cut the TV, can you meet your needs for less with streaming?

Does your mortgage include PITI? If not, you haven't included taxes and insurance in your budget.

How many cell phones does $170 get you?! We pay $30/mo for two phones, with 3GB each. The phones themselves tend to be around $200 every 3-4 years, so you could annualize them at another $10/mo.

How important is the house cleaning to you? If the kids are old enough for cell phones, they are old enough to clean.

If someone needs PT, they need PT. However, have you looked closely at all of your insurance options to verify that you are maximizing benefits, as well as minimizing premiums? Is the PT so specialized that she couldn't explore other options that might save money? DH gets more out of Iyengar Yoga than ongoing PT, even though he did need PT to get mobile again. If this is something worth exploring (and I have no idea if it is appropriate or not in her case), you will spend more up front to explore the different options while continuing PT.

How does your water bill compare locally? If it is high, learn water conservation methods. "If it's yellow, let it mellow" can make a big difference when you work from home.

Groceries: already impressive for a family! I spend that every two weeks for the two of us these days, but lamb and seafood are so delicious.

Will your car insurance reduce your rates if the offending driver takes a defensive driving course? Will your state reduce your points if you take a defensive driving course, which might allow you to switch to cheaper insurance?

The mortgage is all in.

195k gross  and we contribute to Roth 401ks

2 cell phones with unlimited everything from tmobile

$150/week on groceries. I like to eat.




ixtap

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Re: What would you do with $50,000 extra a year?
« Reply #17 on: August 04, 2020, 03:45:35 PM »


$150/week on groceries. I like to eat.

That is very different than the $300/mo you originally listed.

Tester

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Re: What would you do with $50,000 extra a year?
« Reply #18 on: August 04, 2020, 04:32:07 PM »
I think I would retire much earlier....or at least be more comfortable with retiring in 5 years.
50k yearly for 5 years would be around 300k.
Plus the current 350k and a projected 60k/year I am doing right now it would mean I would get really really close the 1 mil.

appleguy

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Re: What would you do with $50,000 extra a year?
« Reply #19 on: August 04, 2020, 11:55:03 PM »
I think I would retire much earlier....or at least be more comfortable with retiring in 5 years.
50k yearly for 5 years would be around 300k.
Plus the current 350k and a projected 60k/year I am doing right now it would mean I would get really really close the 1 mil.

What would I do if I retired in 5 years? I'd sit in front of a damn computer for most of the day reading facebook or writing code. Instead I should get paid for sitting at a damn computer for the day. ... How do I know this? I've been writing code since I was 10. Sure, I go skiing, play with my kid, cook, sex and hangout; but computers are my life man

Tester

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Re: What would you do with $50,000 extra a year?
« Reply #20 on: August 06, 2020, 10:57:14 AM »
I think I would get more into helping people get better at testing/being an engineer.
I kind of do this  now too and I started to look for a transition to a job where I can do this even more. Having the extra cushion would allow me to just completely focus on that.
I still like testing but for the last couple of years I did not get the opportunity to focus on this or other things, I had to constantly jump between several responsibilities.

Kayad

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Re: What would you do with $50,000 extra a year?
« Reply #21 on: August 08, 2020, 11:49:42 PM »
1. If you are truly interested in feedback on spending, recommend you carefully track spending for 3 months or so and then post in case studies.  As a few commenters note, pretty clear you are overlooking a few spending items, and ballparking some others. 
2.  If your goal is not fire (as you say), i.e., you expect to still be working when kid reaches college, prioritize first maxing out tax advantaged buckets (403b, 457 possibly for your wife).  Doesnít make sense to give up tax benefits now and almost two decades of tax free growth if you donít have to.  Better to plan to cash flow much of college costs.  In general, you are almost certainly in a high enough tax bracket that reducing tax bill is low hanging fruit.  Consider whether standard 401k is better bang for your buck than Roth.

YTProphet

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Re: What would you do with $50,000 extra a year?
« Reply #22 on: August 13, 2020, 08:59:50 AM »
I know discussing tithing is taboo around here, but have you considered donating your time instead of money? It could be assisting at a local food bank, homeless shelter, animal shelter, volunteering at church, etc. You could save an extra $200k or so over the next decade if you found ways you could donate your time in an amount that would seem fitting to you.
Volunteering time is very important but unfortunately volunteer hours can't pay the salary for your priest/pastor/rabbi. Need cold hard American dollars for that.

Sibley

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Re: What would you do with $50,000 extra a year?
« Reply #23 on: August 13, 2020, 12:07:28 PM »
"We have a 1 yearold. He eats some food, diapers are cheap like $30 a month. Most baby expenses are really cheap and not worth tracking."

You budget isn't complete. If you leave something as obvious as the baby's diapers out, you've left other stuff out. Track every penny for 3 months, then come back.