First off, thanks to anyone who takes the time to read this.
I have a journal floating around somewhere that I’m terrible at keeping updated. Not sure if I’ve ever done a proper case study. This community changed my life, by the way. Found you guys at the end of 2017 and have since paid off $25K in debt, increased my investment balances by $44K, and increased my income by $21K. Holy shit! Y’all are really out here doing the Lord’s work.
Age: 30F
Not married, no dependents. MCOL area. 2020 numbers are as follows:
Salary (base): $85,362
Annual Bonus: $10,400
Rental Income: $4,800
Phone Reimb: $900
Total Income: $101,462
Everything below is calculated using base salary, rental income, and phone reimbursement, so $91,062 annually. I handle the bonus separately. In the past it has gone to debt repayment – this year it went toward front-loading cash savings in various categories.
Gross Monthly Pay: $7,041.38 (includes rent)
Pre-Tax Savings: 12.8% of base salary
Pre-Tax Deductions
401K: $656.66/month, $9,576/year (10%)
Employer match: 4% = $3,830
HSA: $211.54/month, $2,700/year (2.8%)
Employer contribution: $800/year
Total yearly contribution: $3,500
Medical: $104.40/month, $1,357.20/year
Taxes:
• Federal: $710
• State: $330
• OASDI/Medicare: $483
Post-Tax Deductions: $76 to United Way
Net Monthly Pay: $4,107
Take-Home Monthly Income (+Rent): $4,507
Assets
Home Value: $215,795
401K: $62,834
HSA: $8,725 ($6,500 invested)
Cash: $18,000
Emergency Fund: $10,500
Deferred Spend: $7,500
Total Assets:
$305,354 (with home value)
$89,559 (without home value)
Liabilities
Mortgage: $134,700 (@ 4.25%, 18 years remaining)
Electrical: $4,540 (@ 0% until July 2021)
Total Liabilities:
$139,240 (with mortgage)
$4,540 (without mortgage)
Net Worth:
• $166,114 (with home value)
• $85,019 (without home value)
26 pay periods per year, I consider the extra 2 “bonus” checks & save almost all of it. Numbers below are a reflection of a normal, 2-paycheck month, and include the $400 in rental income I collect, along with a breakdown for the % of total take-home pay each category accounts for.
Total Monthly Take-Home: $4,507
Housing 23.5%
Mortgage $1,060 (includes taxes & insurance)
Utilities 8.6%
Power & Natural Gas $150
Water & Sewage $70
Waste & Recycling $30
Cable & Internet $140 (see notes below)
Auto 6.9%
Gas $80
Insurance $95 (see notes below)
Taxes $36
Maintenance $100
Food 8.8%
Groceries $400
Other 12.5%
Entertainment $400 includes anything not accounted for in other categories. Mostly restaurant eating, random clothes purchases, shower gifts, etc.
Cell Phone $110
Streaming Services $36
TruGreen $20
Save/Deferred Spend 26.4%
Travel $200
Sinking Fund/House $850 (see notes below)
Emergency Fund $100
Vet $40
Debt Paydown 6.4%
Electrical Work $290
Total Monthly Take-Home: $4,507
Total Monthly Budgeted: $4,207
Total Yearly Budgeted: $50,484
Bare-Bones Monthly Spend: $2,360 (housing, utilities, auto, groceries, and debt)
Bare-Bones Yearly Spend: $28,320
Investment Order:
1. Establish an Emergency Fund to your satisfaction
2. Contribute to your 401k up to any company match
3. Pay off any debts with interest rates ~5% or more
4. Max HSA if eligible
5. Max Traditional IRA or Roth
6. Max 401k
7. Fund mega backdoor Roth
8. Pay off any debts with interest rates ~3% or above
9. Invest in taxable account
Some thoughts:
• Recently paid off vehicle not included in my assets above – 2014 Acura MDX that I plan on driving for as long as it’ll go, which is hopefully a Really Long Time. KBB value between $15-20K
• My goal is FI, not RE (for now)
• Sinking Fund/House savings are currently out of control because I anticipate having to replace my entire HVAC system (including ductwork) within the next 12-24 months. Also worth noting that the Zillow estimate I’m using for my home value is probably low by about $15K based on recent comps. Not my forever home but no plans to sell any time soon
• Grocery budget also includes dog food and all household products like laundry & dish soap, etc.
• “Debt Paydown” – I used a 0% credit card to pay for some critical electrical work at my house last summer. 0% until July 2021, no plans to pay off early, no regrets about having the work done
• Charitable contributions are currently only about 1.3% of my gross pay which makes me feel like a real Scrooge. I’ve been in the “put your own oxygen mask” on phase for a while but I feel like I’m out of it now. Would like to see that around 5% by end of 2020
Some specific questions:
1. Generally, am I OK?
2. Do I have too much cash? Not enough? I never want to need to rely on credit to pay for something again so I’m heavily focused on stockpiling for expenses, but I might be over-compensating at this point? That "deferred spend" category includes savings for house repairs (like the HVAC) but also future travel, vet stuff, etc.
3. My plan based on the investment order is to ease off the HVAC savings in July, leave 401K at 10%, open a Trad IRA, & redirect at least $500/month into that. I think steps 5&6 (max Trad/Roth vs max 401K) are interchangeable depending on income. Should I be focused on maxing 401k next instead? Admittedly I like the idea of the TradIRA because I feel behind having only 2 investment vehicles… 401k and HSA.
4. I’m anticipating that HVAC work to cost around $10-$12K. How do others save for expected large expenses other than just dumping cash into a savings account?
5. I separate my cash into 2 categories: true Emergency Fund and deferred spending. I keep them in 2 separate accounts. Neither are particularly high-yield… I think one is 1% APR. Does anyone have suggestions on a better way to manage this cash while keeping it very accessible? I have a ton of available credit for “spongy debt” but the peace of mind of having cash a click away is highly valuable to me.
6. Now that my car is paid off I feel there are potential savings in the Auto category, I just don’t have a good understanding on what all is needed re: insurance and whether cutting back would be worth it. Seems like people around here advocate for dropping comprehensive coverage if you have cash on hand to replace your vehicle but that’s only going to save me about $15/month, seems like peanuts and more risk than reward? What am I missing there?
7. I know cable is stupid on top of the streaming services & I know the phone bill is too high. Those are my current areas of improvement. Anything else glaringly obvious?
8. What stupid shit did you waste money on in your 30s and what kinds of things do you wish you could go back and do instead?
This was way longer than I meant for it to be. Thanks to anyone who made it all the way through. Also I realize the formatting is all screwed up on the budget section... tried for 20 minutes to fix that and gave up. Sorry.