Topic Title: moving along what else can be done to optimize?
Life Situation:
Head of household, fiancé and 2 kids 1 and 3. If you ask us we are married but not officially. Me 34 her 27.
Gross Salary/Wages: 4,272.00 monthly / $51,264 annual gross salary (quarterly bonus, annual bonus in other ordinary income category)
Individual amounts of each Pre-tax deductions
401K: 256.32; 100% match up to 3.5%
HSA: 50
High deductible health insurance: 44.50
Other Ordinary Income: Averaged everything out for the 11 quarters I have had this current position.
Average Quarterly Bonus Gross: $3,882
Annual Bonus: 50% can be elected for 401K, company stock, and /or cash. Other 50% issued in RPU’s which vest 20% each year over 5 year period.
2016: Gross $6,288.99 - 50% electable portion Gross $3,144.49 Net $2,076.94 elected this portion in cash
2015: Gross $8,699.32 – 50% electable portion Gross $4349.66 Net $2872.99 elected this portion in cash
Average Annual Total Bonus Gross: $7,493
Average Annual Total Other Ordinary Pay: $23,021
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Qualified Dividends & Long Term Capital Gains: Nominal this far, not significant.
Rental Income, Actual Expenses, and Depreciation: none
Adjusted Gross Income: 2016 AGI =$65,663 (according to 2016 tax return)
Taxes:
Federal $6,277.62
State/local $877.78
FICA $4,212.70
FICA Medicare $985.23.
Total: $12,352
Current expenses:
Rent: $1193.00
Water/sewer/trash: ~$70
Electric: ~100 now; estimate $250 summer in Phoenix?
Life insurance: $129 both of us
Auto Insurance: $223 both of us
Internet: $40
Phones: $60 both of us
Food/groceries: ~$800 (measured 2 mos. Thus far and this was about the average; had guests 1 month spent more on good food)
Gas: ~$200 (was at $198 last month and pretty representative of ordinary month)
About $350 left over at this point now assuming I don’t need to modify my withholding allowances and this expense total includes estimate of $250 for electric for hot part of year.
Household and toiletry stuff also but can’t seem to quantify monthly amount accurately now.
Total: $2,965 (using estimated $250 electric bill for summertime)
Assets:
Checking: $2,500
Money Market Checking Backup Cash: $6,300
401K: $29,500
HSA: $280
Roth IRA: $344
Fidelity 529 (1): $282.51
Fidelity 529 (2): $153.49
Class A Company Shares Vested: $634.81
Taxable account: $105
PAF (Portable Account Formula – should I count this as an asset?) – Company offers this as defined benefit: ~$13,000 to date
Unvested Company shares: $7,182.00
2 Cars; valued at $1500 and $4000 most likely for conversation sake not included in NW calculation.
Total: $60,281.00
Liabilities: 0
Specific Question(s):
Commentary
I wanted to get my current situation out there because I realize other sets of eyes looking at it could offer valuable advice and perspective that can help me shape the optimal future. I feel good about the direction we are going in and feel things will really accelerate when we become a two income household in a little over a year. Any thoughts or specific advice to my commentary and questions below regarding my thoughts on my situation are certainly appreciated.
I believe AGI moving forward 2017 will be slightly different due to (not only changes in quarterly / annual bonus – could go up or down some) now being debt free after selling our home last year and moving into single family rental. This means I’m still fine tuning the tax deferred contributions to maximize them while still being able to support the household on my income until my wife finishes nursing school May 2018. (Eagerly and happily awaiting)
I will use the current amount have been contributing to 401K of 256.32 (7%) + 200 for HSA (this change will take effect this pay period – increase from $50 monthly but ultimately just started funding the HSA). I think these deductions will be around the max so we can continue to live off my monthly salary. So then my quarterly and annual bonus I am thinking will go into my 401K tax deferred moving forward now that we have no debt and my cash account has got some comfort money.
So first question: Is my idea to have a payroll deduction of $1800 in April so that my HSA account has the necessary balance so I can begin investing the account in the Vanguard fund available with a low management fee which I believe is .05%. And then resume normal monthly contributions of$200? I haven’t found a problem with this idea on my own yet.
Also, thoughts: I think I might have to decrease the number of withholding allowances on my paycheck. I have like 7or 8 now and after selling my home and having over $11K in mortgage interest paid and also the maximum tuition interest deduction around $2,500 I believe (paid $6k tuition interest total) it only reduced my income a couple grand to the AGI of $65,663 from the total of $68,679. I’m thinking I either went wrong filing taxes somewhere or have too many federal withholding allowances which causes too little tax to be taken out. Not quite sure. Does this sound like either an error was made filing taxes (automated online software takes you through step by step, ezTaxReturn.com) or I need to adjust my withholdings so I don’t have a huge tax bill? I did owe the state around $1150 this year while my federal is a return of about $3600. Could I be getting this return despite taking little taxes out of each check due to the home sale and subsequent mortgage and tuition interest deductions that resulted whereas otherwise I might have a much bigger tax bill?
Other notes and commentary for potential feedback: We don’t consume mindlessly and much at all but we recognize our food spending is high and should have considerable room for improvement. The fact that I can’t specifically speak to the other miscellaneous expenses might indicate a problem of some sort. Thoughts?
Only other things we would buy as far as monthly expenses would be diapers for the 1 year old, wife bought a $20 inflatable pool for the kids the other day, I bought a DSLR camera (investment last month about $650 and we purchased free weights and squat rack recently about $500 total.) Other than that we won’t take on debt and always spend less than we earn. Thanks much to this sites influence and education.
Another specific question I have is should I include my works PAF (Portable Account Formula) as an asset in my newt worth? Anyone familiar with the intricacies of these enough to comment? I do know my Company offers this as defined benefit and that mine is currently worth about $13,000 to date.
Please excuse the long winded nature of the case study post and perhaps rambling or thinking out loud nature of the questions I am posing. It’s just one of the ways I’m odd.
Further, when the second income comes it will probably look something like:
-Max 401k each of us
- Max HSA
- Roth as much as possible
-the excess money may run out somewhere near here but anything else in the taxable account. (Thank you investing order post in investor alley)
The goal is FI (RE) in 10 years. Please call me crazy if you think it fits based on what you now know, which is a lot.
Thank everyone in advance for their time in offering their words of wisdom. I appreciate it.
