$110K income, 2 kids, on track for normal retirement, would like early

[Gay Burqueño Dad]

Life Situation: Gay-married, 34 & 36, 2 kids (4 & 5), live in Albuquerque, New Mexico

Gross Salary/Wages: $110K ($80K and $30K)

Individual amounts of each Pre-tax deductions
401k: $25K
HSA: $10K
Insurance:$7K

Adjusted Gross Income: $83K

Taxes: $17K

Current expenses (Annual):
Restaurants                      1,596
"Shopping"                              5,063
Cars                                      3,562
Miscellaneous                      1,720
Childcare                             7,740
Groceries                             15,441
Gym                                      288
Home (HOA, Home Depot)      1,695
Medical                              3,994
Mortgage                              9,174
Telecoms                             1,990
Utilities                              3,740
Vacation                              5,542
Total                                     61,545

On the mortgage, the principal & interest is minimal – we only owed $50,000 to start and our interest rate is I think 3.25%. But it is a $315,000 house in a high tax area.

Cars: 2014 Nissan Leaf & 2013 Toyota Sienna. The Sienna was a mistake I think – we only have 2 kids and don’t want more. I haven’t gotten around to unwinding it and getting a Prius V or something though.

We live about 8 miles from work – not really open to changing it. The neighborhood is somewhat unique due to being insanely safe & thus allowing more independence & freedom for the kids, and due to having a communal HOA pool.  This makes our life way better, & lets me get way more cooking & DIY home maintenance done. (There is less kid independence & freedom, and less home maintenance done, when the pool is filled, but more low-stress pool parenting & pool workouts so good for all seasons :-) )

Expected ER expenses: Should be somewhat lower than now due to lack of kids

Assets:
$250,000 in various retirement funds (About $25K of original Roth contributions as our emergency fund)
$15,000 in HSAs
$3,000-$7,000 in checking account
$265,000 in home equity

Liabilities: Mortgage, $50,000 principal at 3.25% interest, 30 years, opened a year or two ago.

Specific Question(s):
1)   We have had some big life changes over the past year which is why there are some round numbers above in the income & tax categories. My guess is that due to our ~30% savings rate we are currently on track for a comfortable normal retirement but not an early one. Sound about right?

2)   I just started tracking our expenses a month ago and have implemented $240/mo. in savings since then (various subscriptions/donations that had gone on autopilot and I was fine with cancelling; cheaper cell plan for me; putting my husband’s credit card on autopay so we wouldn’t get charged interest.)
That's not reflected above; above is more or less actual expenses for the past year.
It seems to me that the main places to hit next are:
a.   Telecoms (e.g. $65/mo. for internet)
b.   Insurance ($1300 annually for car insurance, haven’t gotten home insurance number yet)
c.   Groceries ($15,000/yr. is pretty high for our family size, though I think we’re not TOO bad on restaurants).
d.   Ditch Sienna, get something smaller
e.   Find out what is in the “Shopping” line item & cut down on that
Are those where you would focus your energy?

3)   The vacation is a mandatory 1/yr. trip to see the kids’ birth mom. We’re thinking about trying driving instead of flying to save some cash and see some cool stuff on the way. Is that insane with a 4 and 5 year old? It is a 20-hour trip across the western US, we are thinking about doing it in ~3 days each way. My husband says 2 but that sounds crazy to me.

4) I read some article saying HSAs are amazing (no taxes ever) but $10K/year indefinitely seems excessive? Move some $$ to 401k until we hit the limit / IRA?

[calimom]

Your grocery spend is pretty high, as noted. There are a number of current and older threads here on how to dial this  back. My own family spend was inching up and I've been making conscious effort the past couple of months to dial it back. I have a couple of teenagers, including a 17 year old eating machine so it's not easy, but doable. Check out www.budgetbytes.com for recipes. Restaurants not horrible but added to the grocery spend..well.

When daycare goes away in a couple of years, will some of the savings go toward 529 or other college saving vehicles? Will the 30K earner wages go up at some point?

Maybe keep the Sienna for the upcoming road trip. Traveling with kids the ages of yours can be fun! And you can knock out some of the current vacation budget. There are lots of ways to do this. And sell the minivan upon your return if you wish.

Look at all insurance and phone costs, and find better options as possible. I know little about HSA so others may weigh in with more helpful feedback.

Overall you guys are doing great. Maybe a brainstorming session about side hustles and real estate investment to see what other options you could explore, while still keeping a good work/life balance with your growing family.

[YttriumNitrate]

Earlier this year I did a nine hour trip (each way) in a car with a one year old and a four year old. It wasn't as bad as I was expecting since we started really early (way before dawn) so the kids slept 3-4 hours, and rules regarding limiting screen time do not apply in the car. While I would definitely do the road trip again, doing it in back to back days seems like it would be tough.

[Laura33]

You're spending over $500/month on stuff you can't even account for (shopping and miscellaneous).  Add that together with the excess food (groceries and eating out), and that's $1K/mo. that just seems to be disappearing.  I'd start with that -- figure out what part of that is legitimate stuff that you want to continue (like kid activities), and how much is just mindless spending.

Definitely look at the vehicle, if you can find a used option that is cheaper and more fuel-efficient.  Or even better, go down to one car.  What about biking to/from work?  Totally doable in that climate (although the ride home in summer would suck -- I used to live there, I know!).  If you're not willing to take that step, then yeah, look for the cheapest commuter econobox you can find.

[Gay Burqueño Dad]

Unfortunately, one car and biking are not feasible for us unless we moved into the city.  I happily biked to/from work for 10 years (including some with kid pickup/dropoffs) when we lived in another city with worse weather according to my preferences, so I'm not just being a complainypants. Currently, work schedules, no bus home for after-school care, etc. make it just not feasible 3 days/week. There are 2 days/week where I have no kid pickup/dropoff duties and could bike. However, I am not athletically gifted and there are 1-2 big hills (depending on the direction) to deal with on the commute. My belief is that I would need an ebike in order to do it regularly, and that the investment in an ebike wouldn't pay off given only 2 days/week of use.

As to moving - certainly a possibility and we have thought about it. I really miss my bike commute! Unfortunately, Albuquerque has a high enough crime rate that we would likely be vulnerable to CPS enforcement if we let our kids play freely in the city like kids have for countless previous generations (but somehow Americans have decided, most kids are not allowed to for this generation). We feel pretty strongly about allowing our kids some freedom and independence and are willing to work a few more years in order to allow that. Also I believe that the increased home cooking/DIY projects that I am willing to do on the weekends because there won't be two bored kids underfoot the whole time cause enough expense reduction to pay for part of the second car.

But yes, a cheaper car & a hard look at the grocery and shopping categories are good ideas.

[Gay Burqueño Dad]

Re: Calimom - "When daycare goes away in a couple of years, will some of the savings go toward 529 or other college saving vehicles? Will the 30K earner wages go up at some point?"

Yeah, I forgot to mention we have some 529s. This past year we moved metro areas and had some big life realignments so we skipped contributing this year, but we intend to contribute next year and all future years.

The 30K earner (my husband) has no plans to increase earnings. It's more logical that my $80K would go up in the future.

[Dee18]

I want to hear a trip report if you drive that far with two young children!  :)  I think that is way too much “seat time.”  (I routinely drove 400 miles each way for long weekends to see family when my daughter was young....that was long enough.). Also, I suspect by the time you add all hotels and meals up you won’t save much unless you are camping.

[Sanitary Stache]

Hi @Gay Burqueño Dad.  I am jealous of your minivan.  That is the kind of luxury I am willing to work more for.  Your expenses don't look too different from ours and at a younger age, you have more saved, so based on those rock solid numbers I think you are on track for retirement at 55 or sooner.  The simple math didn't resonate with me since I have built some big childcare expenses into our budget, so I have tried projecting out budgets and expenses until likely retirement ages and came up with a possible retirement 20 years from now.  I found it encouraging actually.

Some of your numbers that are rounded seem off to me.  For instance, the HSA contribution limit was $7,000 this past year so you shouldn't have put $10,000 in. And how many/what kinds of insurance get you to $7,000 per year? Do you and your husband both have a 401k?

Otherwise I think you need to figure out what your spending money on for shopping and groceries.  You talk about doing a lot of cooking in the home so maybe you will enjoy optimizing this part of your budget.  I can't comprehend how to spend $1,000+ per month on groceries without throwing a large amount of food away. Also, $5,500 seems like a lot for one vacation, maybe you would enjoy travel hacking credit cards to reduce the air fare costs? 

Have you looked at the investment order yet?  https://forum.mrmoneymustache.com/investor-alley/investment-order/
You don't list contributions to a Roth or Traditional IRA and you are contributing quite a bit to the 401k item.  Are your employers matching that amount?  That would be great. You don't ask for investing advice, but have you read jlcollinsnh.com/stockseries? 

I have learned more about HSAs and after the 401k match, maxing the HSA is my priority. This post from the Mad Fientist helped me understand more. https://www.madfientist.com/ultimate-retirement-account/

[Gay Burqueño Dad]

Oh jeez, thanks for the heads up on the HSA rules! The HSA is me putting in the family max (I have the two kids on my insurance) and my husband putting in the personal max on an annualized basis. Looks like the family max is the max for the whole family, even if the other spouse is working. My husband just started working again this summer so he didn't get to $3,500 this year but I suspect that we did go over $7,000 regardless. Gotta figure out the tax fix for that....

(Went off to figure it out... for anyone else reading you need to take money out of your HSA to "withdraw the excess contribution." My HSA administrator has a form for it. Also need to change contributions for next year so the same thing doesn't happen again.)

Yeah, the numbers are kind of round because my husband started working again mid-year this year so I just multiplied last paystubs (for me) and guesstimated (for him). That could definitely be improved. And I did forget the employer match, makes things better!

I am going with the 401ks for now just out of simplicity. The ones we're putting money into for now are Roths (to rebuild our emergency fund after we depleted it moving) but we probably have plenty of emergency fund now and can and should switch to traditional. We aren't currently maxing out the contribution limits which would necessitate IRAs but we have done IRA contributions in the past. I suppose my IRA provider is likely lower-fee and definitely more flexible than my 401k provider so I could see a small improvement from moving some 401k contributions to IRA.

[Gay Burqueño Dad]

And I forgot to say - thanks @Sanitary Engineer ! (You taught me that one can tag on this site :-) )

Re: investing - I'm ~15% US stock index funds, 5% US clean energy funds (My belief is that climate change is a thing that will eventually matter financially), 80% international stock index funds. That link didn't work but I've never been that interested in picking stocks, etc.

@calimom - re: additional income - Honestly, we are stretched as far as is comfortable re: work/life/childcare balance. At least for the next 1.5 years (kids at 2 schools), I don't think we have capacity for rental properties, side hustles etc. What we've had the most success with in the past is increasing my income - the current $80K one. I made significantly more before we moved metro areas for mental health & family reasons. Granted, that was in a higher-cost metro, but I still think there's hope for moving into management/etc. Electric utility industry - pretty stable, not the most lucrative industry, but still in the private sector salary scale range.

[Sanitary Stache]

Here is a real link
https://jlcollinsnh.com/stock-series/

It's all about why a total stock market index fund is the Simple Path to Wealth (the name of his book), and has a bunch of other easy-ish to digest information about how difficult it is to not take your money out when the stock market varies in the downward direction and other investing considerations.  It sounds like you are on that path already. 

[seattlecyclone]

I think you're in pretty decent shape overall. Your spending right now is around 65% of your after-tax income, which the shockingly simple math would suggest puts you on track to retire in 25 years if you were starting from zero net worth. You have much more than zero net worth, so I'd say you're already on track to retire a bit early by most standards.

The child care expense should naturally diminish as your kids age into full-time public schools. Groceries are definitely your biggest opportunity for a quick win on the spending side. You should be able to cut this in half or more. It will take some effort and practice to learn the grocery game, but I see this as perhaps the easiest way to cut $5k/year out of your budget.