Well, it sounds like you have a good plan in place. I think the move and house change is your best bet- you're locked into a place right now where you won't be able to afford to have her stay home.
That 6.8% SL is pretty rough. Any thoughts on refinancing the loans? Keeping in mind that if they're federal, you won't qualify for income based repayment or anything once you've consolidated them. I seem to recall you mentioning your wife is a nurse elsewhere? When looking for a new job, see if she can negotiate loan repayment, or look into whether any of the hospitals in the area count as 'under-served' by the government- you can get loan elimination for these through Nurse Corps. If I remember right it was 25% loan elimination after 1 year, and another 33% after 3 years or something like that. Anyway, worth considering if most of the debt is hers.
if your tax rate is 25%, then doesn't it make sense to max out 401k before paying off the SL?
http://forum.mrmoneymustache.com/ask-a-mustachian/investing-vs-student-loan/
why not sell the house and rent an apartment?
is the rental market really crap where you live?
Where are you living that requires a 390k house 90mins from work in Texas? I could get at least 4,000 sq ft in Texas for that, 30 mins from work. Property taxes are a killer on houses in Texas as well. Your income is currently half ours and you have a house worth twice as much.
good luck. looking forward to updates.
I think even though you laid it out, it's not 100% clear. Probably clear because you wrote it, but the cold body reader, maybe not so much.Where are you living that requires a 390k house 90mins from work in Texas? I could get at least 4,000 sq ft in Texas for that, 30 mins from work. Property taxes are a killer on houses in Texas as well. Your income is currently half ours and you have a house worth twice as much.
Did you read the OP? Like seriously, you comment about far commute, high property taxes, and too much house when I laid it out nicely above. Do you think I am selling my house and moving for no reason?
I'm not trying to be a douche about this, you just post like I didn't think once about any of those consequences.good luck. looking forward to updates.
Thanks Hairy.
I feel like I need to facepunch you on the houses, both current and future. You're living in a nearly $400k house in Texas? For just the two of you?! Either you're living in a very expensive area (in which case you probably need a facepunch), or you're in a house that's way too big (in which case, facepunch again).
I mean, it's great that you're selling the $390k house that's 90 minutes from work and all, but you're only going down to a $350k house?
I feel like I need to facepunch you on the houses, both current and future. You're living in a nearly $400k house in Texas? For just the two of you?! Either you're living in a very expensive area (in which case you probably need a facepunch), or you're in a house that's way too big (in which case, facepunch again).
I mean, it's great that you're selling the $390k house that's 90 minutes from work and all, but you're only going down to a $350k house?
I feel like I need to facepunch you on the houses, both current and future. You're living in a nearly $400k house in Texas? For just the two of you?! Either you're living in a very expensive area (in which case you probably need a facepunch), or you're in a house that's way too big (in which case, facepunch again).
I mean, it's great that you're selling the $390k house that's 90 minutes from work and all, but you're only going down to a $350k house?
Gosh, that's not very nice, especially since the OP wasn't asking for advice on how to cut down his costs.
And Texas is huge, so you can't just make generalizations about housing prices. Austin is getting to be quite an expensive place to live, especially if you want to be central (and traffic is so awful now that it makes a huge difference in commute time to live farther out). I sold an older 1-bedroom condo in Austin for over $200K two years ago, and prices have only gone up since then.
I think even though you laid it out, it's not 100% clear. Probably clear because you wrote it, but the cold body reader, maybe not so much.
So you currently have a 90 minute commute?
And I guess the person asking the question about the cost of the house probably doesn't live in your area of TX. I'm not in TX, but I have friends there. Even a quick google search shows me that there are easily areas of Dallas and Austin that have that price tag. And the commute? Well, that depends on where your wife works too.
Where are you living that requires a 390k house 90mins from work in Texas? I could get at least 4,000 sq ft in Texas for that, 30 mins from work. Property taxes are a killer on houses in Texas as well. Your income is currently half ours and you have a house worth twice as much.
Did you read the OP? Like seriously, you comment about far commute, high property taxes, and too much house when I laid it out nicely above. Do you think I am selling my house and moving for no reason?
I'm not trying to be a douche about this, you just post like I didn't think once about any of those consequences.good luck. looking forward to updates.
Thanks Hairy.
It would be, but my objective is to go to SAHM so drop to one income. This means cash flow is king to me.
Rental market is tough with 3 dogs. Not to mention, a rental will run $1800-$2000. A mortgage would run $2000-$2200.
Fair enough. Maybe I was a bit harsh, but I still think he read the first half and posted his remarks!I've got friends in Colleyville and Oak Cliff. And elsewhere in Dallas too. Some areas are pricey! Colleyville folks have their eldest in...oh, some Top tier STEM high school.
Currently 90 minute commute while school is in session, drops to 60 when it is not.
I do live in Dallas, sorry, I guess I should of mentioned that.
Life Situation: UPDATED 02/16/2016
Gross Salary/Wages:
$75,000 me (should be moving up to $82,000 on April 1st)
$67,000 her
$142,000 Salary ($25K increase in salary, $32k on April 1st estimate)
Pre-tax deductions:
14% 401k me + 3% emp match me
5% 401k her + 5% emp match her
Healthcare = $450 a month (Both of us, Med,Vision,Dental)
Other Ordinary Income:
Side Income = $6000-$8000 (cash) once a year. Not guarenteed every year.
Made $9,000 cash Dec 2015. May have it one last time at tail end of 2016
Current expenses:
Gym: $20
Car Insurance: $143
ATT Internet and DirecTV: $100 (FP on TV)
ATT Cell: $150 for both ($70 back from my company) = $80
Utilities (G,E,W): $280 (estimate)
Student Loans: $191 me/ deferred payment for her (add another $530 in July)
Food: $500 (includes dog food, $40 a month)
Gas: $200
Subtotal: $2,114 (starting in July)
Mortgage:
Went under contract on my house today yay! Bought for $331k in Sept 2014, under contract at $374k. Net proceeds ~ $37.5k
Expense Total Monthly: Estimating mortgage payment to be the same or slightly less $2,550 a month + $2,114 = ~4,664 in bills.
Assets:
Cash for downpayment: $17.5k + bonus in March ~$5k after taxes = $23.5k
Home: ~$374k
My Car (35k miles), paid off, Hyundai
Her car (110k miles), paid off, Chrysler POS
Misc assets, furniture, etc. $XXk dollars.
Retirement Accounts:
$85.5k in Vanguard IRA
$6.2k in 401k
Liabilities: (pretty much the same)
Loan.....................Amount........Rate
Student Loan 1........$24,467.10...6.80%
Student Loan 2........$9,050.48.....5.16%
Student Loan 3........$23,587.86....~4%
Student Loan 4........$5,422.35......~3%
Mortgage: $307k @ 4.125%, 30 year fixed. (Bought Sept 2014) (soon be different)
1. So, the big thing is that my wife and I decided that she will not be a SAHS, but she will return to the work force. Since she is a nurse, she will be able to work flexible hours and she is okay with sending a child to daycare for a handful of days.
2. Income went up $25K (fairly confident on $82k, but it might fall short to $80k, find out in March).
3. On top of 401k's, we are saving ~$3,000 cash a month. Very happy about this. It has made saving for a down payment MUCH easier. By the time we close (Mar 24th, leaseback until April 24th), we should have close to $67,500 cash to put onto a house.
Questions for you fine people
1. How are we doing?
2. Should we focus on Student Loans instead of putting extra in 401k (besides matching)?
Wow you guys are in a fantastic spot!!
Healthy incomes, good savings rate, and it will only get better from here on out =)
Thanks for the update!
1. Congrats on the raise! That is excellent.
2. Be sure to pay off as much of her accrued interest as possible before she leaves deferment, so that it does not capitalize into the principle! This is a huge mistake many people make.
3. I personally am paying off all student loans above 5% until I add more to my 401(k) past the match. It depends on what you think is reasonable returns. I think argument could be made for your 5.16% loan, but I would want that 6.8% gone ASAP. You are not going to get market returns higher than that. I have a credit card that is scarcely higher than that (7.4%). That's a lot of money to have losing that much... I suppose the counter argument is, if you think the market is at a 'bottom' right now, you'll want to buy in so you profit on the upswing. I guess it largely depends on how confident you are of high returns.
I'm sure you've seen this before, but in case you haven't:
WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield. (yield is currently 1.78%, so anything above 6.78%)
3. Max HSA
4. Max Roth or Traditional IRA based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, swap #4 and #5)
6. Fund mega backdoor Roth if applicable
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield. (yield is currently 1.78%, so anything above 4.78%)
8. Invest in a taxable account with any extra.
WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks
1. Company match rates are likely the highest percent return you can get on your money
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.
4. Rule of thumb: trad if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between
5. See #4 for choice of traditional or Roth for 401k
6. Applicability depends on the rules for the specific 401k
7. Again, take the risk-free return if high enough
8. Because earnings, even if taxed, are beneficial
If you're comfortable going into it, I would love to know more about your decision process with her returning to work. I ended up going to work full time (also a nurse), but we had the SAHS discussion, so I'm curious about parallels/differences!
That's some great progress!
With regards to feeling like you're being too tight, I can relate. For DW and myself, we include an "entertainment" category in our monthly budget. That allows us to eat out, or do something more fun/discretionary, without feeling guilty.
You are in a very solid spot. Make sure you have enough emergency fund, and then plan a vacation. It gets much harder to get away after you have kids, so take one now! Does not have to be too spendy, but that way you don't feel like all you do is work and save.
Once you have the right fundamentals in place and your don't have hair-on-fire debt, you should be thinking about lifestyle design, as opposed to just constant saving. What is the life you want for yourself and your family? That does not mean spending, but may mean paying for those activities or trips that truly add value.
Best of luck!
Nice job on the salary increases, selling the big house that was in the wrong place and on controlling spending.
Two of your student loans have interest rates over 5%. Is there any chance you could refinance them to something under 4%? You would then be at the point where you could slow down the overpayments and free up some cashflow for a bigger emergency fund (nice to have when hopefully kids are coming along) plus a small "entertainment/frivolities" monthly budget.
I agree with Lucky Girl that a holiday before you have kids is the way to go.
Life Situation: UPDATED 08/09/2016
Income is same since last update. Still on target to get off cycle raise of probably 5-6% in October.
Mortgage payment from moving is down $300 dollars! I was very excited about this one.
It finally hit me...... my god! I don't have any cash reserves in case the worst happens (even though it was mentioned in this thread)! Immediately flipped the switch on this in July, this Friday, we will crack $10,000 in e-fund. Very happy about that. We were paying nearly $3,000 a month towards other debts and it slapped me in the face hard that cash is king. Can't believe it took so long.
Now that I have $10,000 cash put aside (3 months efund), I will continue walking that up to $15k while shifting some back to paying off debts.
We are living off pretty much my income minus the $500 student loan payment for my wife. Spending has been variable lately, so I am really trying to get that in check to free up cash flow. It should get better going forward.
TTC Baby #1 so our income should stay constant for at least 9 months from this date.
Life is getting better, now with cash reserves, I feel a little more secure than I did 3 months ago.
Income: $152K
Assets: ~$120K 401k + $10K EFund
Debts: Mortgage, Student Loan, Home Improvement Loan (small)
1. So, the big thing is that my wife and I decided that she will not be a SAHS, but she will return to the work force. Since she is a nurse, she will be able to work flexible hours and she is okay with sending a child to daycare for a handful of days.
Assets | Amount | ||
E-Fund | $15,000 | ||
401k+IRA | $120,000 | ||
Expenses | As of 10/15/16 | ||
Gym | $20 | ||
Amica | $143 | ||
DirecTV | $55 | ||
Grande Internet | $50 | ||
ATT Cell | $150 | ||
Coserv | $250 | ||
Water | $120 | ||
Student Loans | $700 | ||
Food | $500 | ||
Gas | $250 | ||
Tolls | $320 | ||
Loan B | $225 | ||
Total Bills Ex Mortgage | $2,783 | ||
Mortgage (Fully Loaded) | $2,250 | ||
Total Bills | $5,033 | ||
Take Home | $10,800 | ||
Leftover | $5,767 | ||
Savings Rate | 53.4% | ||
Debts | Amount | Term | Interest |
A | $313,000 | 30 | 3.75% |
B | $31,000 | 20 | 5.99% |
C | $63,000 | 10 | 5.11% |
D | $4,100 | 0 | 0.00% |
Payment Plan | Allocation Monthly | ||
Savings | $1,500 | ||
Student Loans | $2,000 | ||
Loan D | $1,500 | ||
"Flex" Spending | $767 |
By my math (and I truly hope I'm missing something here) a year ago you were in debt $369,526. Now you are in debt $411,100, so your debt has increased $41,574. I'm puzzled about why this leads you to "feeling good."
Congrats on the higher income, but how/why did you add $30k in non-mortgage debt?
Edited: nevermind
Assets | Amount | ||
E-Fund | $15,000 | ||
401k+IRA | $180,000 | ||
Expenses | As of 04/02/2018 | ||
Gym | $20 | ||
Amica | $143 | ||
DirecTV | | ||
Grande Internet | $50 | ||
ATT Cell | | ||
Coserv | $250 | ||
Water | $120 | ||
Student Loans | | ||
Food | $500 | ||
Gas | $250 | ||
Tolls | $320 | ||
Loan B | $225 | ||
Daycare | $1300 | ||
Car | $515 | ||
Total Bills Ex Mortgage | $3,922 | ||
Mortgage (Fully Loaded) | $2,250 | ||
Total Bills | $6,127 | ||
Take Home | $10,800 | ||
Leftover | $4,673 | ||
Savings Rate | 43.3% | ||
Net Worth | +$186,300 (roughly) | ||
Debts | Amount | Term | Interest |
A | | 30 | 3.75% |
B | | 20 | 5.99% |
C | | 10 | 5.11% |
D | $29.537 | 6 | 1.8% |
Congrats on the student loans achievement for yourself. I’m surprised though with all that you’ve learned that you would finance a $30k vehicle? You just added more debt. Every piece of advice is take $8000 or less in cash and buy a used vehicle. Now you have more repayments, when your goal should be none, outside a mortgage and saving as much as possible. Weird.
Congrats on the student loans achievement for yourself. I’m surprised though with all that you’ve learned that you would finance a $30k vehicle? You just added more debt. Every piece of advice is take $8000 or less in cash and buy a used vehicle. Now you have more repayments, when your goal should be none, outside a mortgage and saving as much as possible. Weird.
I get the forum wouldn't approve of it. It's low interest debt that I can handle. Was it the most financially sound move? No but I have no regrets.
Thanks for the post. In July 2018, daycare will drop by $500ish and we will start doubling down on the car. Should be able to pay it off quickly.
I understand the criticism though.
After re-reading the original post, I realize I was arrogant and brash back in 2015. I was much more aggressive, hostile, quick to react, "smartest guy" in the room mentality. I made many mistakes in the past but I feel I have a much clearer mind and more wisdom typing here in 2019. It is amazing how a person can grow in 4 years time. I am glad I left this post for myself to reflect.
Without updating the entire table, just some nuggets:
Debts:-$369,387-$340,189 It was 4 loans, now only 3 remain, excluding the mortgage, I have $49K debt.
Without updating the entire table, just some nuggets:
Debts:-$369,387-$340,189 It was 4 loans, now only 3 remain, excluding the mortgage, I have $49K debt.
So you've actually taken on more debt since your last update a year ago? Because a year ago your non-mortgage debt was only(!) 37k, but now it's 49k. So, new consumer debt since you started posting here is a car loan, a home improvement loan and now this unspecified other 5 figure loan.
You've got a great income, you can pay it off, again. But it is not the mustachian way, and this continuing cycle of paying off debt while adding new debt is pretty standard modern consumerism, and a worrying pattern for your family's future.
I'd like to see you commit to taking on no more consumer debt in the next year.
So I'm guessing the "C" debt has been retired? That's great!QuoteAfter re-reading the original post, I realize I was arrogant and brash back in 2015. I was much more aggressive, hostile, quick to react, "smartest guy" in the room mentality. I made many mistakes in the past but I feel I have a much clearer mind and more wisdom typing here in 2019. It is amazing how a person can grow in 4 years time. I am glad I left this post for myself to reflect.
It's a good thing when one can recognize this. I like to say "the older I get, the dumber I was." I may not be smart now, but I'm a lot less dumb than I was! :) I'm a lot more teachable now than I used to be.