The Money Mustache Community
Learning, Sharing, and Teaching => Case Studies => Topic started by: Jwolfe on December 09, 2020, 09:54:21 AM
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Item Monthly Expense Notes
Mortgage/Homeowners/Property Tax $1,480.00
Internet $40.00
Life Insurance $58.43
Auto Insurance $94.05
Student Loan $220.00 4% Interest
Child Health Ins. $20.00
Water/Sewer $33.00
Trash $18.00
Pet Supplies $55.00 Big Dog (11 Years Old)
Car Gas $80.00
Electricity $75.00
Gas Bill $90.00
Chiropractic $65.00
YouTubeTV $70.00
Young Livin' $100.00
Costco Membership $10.00
Groceries $600.00
Wife Health Insurance $220.00
Entertainment $0.00
Child (Clothes, Supplies) $0.00
Tithe or Charity $0.00
Restaurants $0.00
Miscellaneous $0.00
Travel $0.00
TOTAL Expenses $3,328.48
Monthly Net Income $5,791.00
Savings $2,462.52
403b Roth IRA $100.00 Currently about $50,000 (56% Vanguard Total US Index Admiral, 22% Vanguard Total Bond
Index Admiral, 22% Vanguard Total International Stock Index Admiral)
HSA $254.17 Balance $4500 (56% Vanguard 500 Index Admiral, 22% Vanguard Total Bond Index
Admiral, 22% Vanguard Total International Stock Index Admiral - Would switch the
500 to Total US but it's not an available option.)
Employee Pension Cont. $349.22
Employer Pension Cont. $524.10 Years Divided by .3 is the amount I can claim. IE: After 30 years I would get all employer
contributions as well. I have currently worked 10 years.
Where to put?? $1,225.03
Current Savings Rate 42.51% Less if I add to any of the "Fun" Rows
Areas to Cut: YouTube TV was $35 when I first started... now $70. Looking into an antenna and OTA DVR to cut that.
I'm probably a year out from paying off the student loans but that will be another $200/month towards savings. I wish my wife would do less Chiropractic ($65/month) and her investment into Young Living is a passion of hers. We're working on finding her ways to offset some of that cost. Otherwise the only other area I see that could be reduced is groceries. I thought $600 was reasonable for a family of 5.
So I'm looking for suggestions to speed up FIRE and where to put that additional $1,225. I have maxed out the HSA contributions and according to the investment order forum I should max out my Roth 403b next. Admittedly I don't really understand the loopholes to that for early retirement so I am concerned about putting too much into that 59 1/2 year old basket. I am currently 33 years old. Remaining mortgage is 205k, property taxes are absolutely ridiculous at around $6,500 annually. My goal is FIRE in 15 years or less, but I know I am nowhere near that based on my current savings rate - which based on the numbers above includes 0 travel/outings or tithing, blehh. As a public employee I would retire like a bandit at 55 between the combination of my savings and public pension. I do not want to work until I'm 55.
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Do you have any employee retirement savings vehicles aside from the pension program? Something like a 401k, 403b,
457, etc.? Ideally you would have some more tax advantaged space to fill up before moving to a taxable account. But if you don’t, then it is perfectly fine to open a taxable brokerage account and invest there. The thing to keep in mind is that there will be tax content sequences to selling so you want to think a bit more about what to put in there than you would for a tax-sheltered account like your IRA.
Young Living ... I had to look it up. Essential oils? I won’t pretend to understand that. Is this where people literally found a way to sell others snake oil and charge a pretty penny for it?
Otherwise your expenses look reasonable, though you point out yourself that YouTube is pricey. Could you do Netflix for a lot less?
You mention a family of five but only have health insurance premiums for two family members listed. What is happening with everyone else?
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As far as accessing retirement funds early, this is a good place to start: https://www.madfientist.com/how-to-access-retirement-funds-early/
For YouTubeTV, you can add up to six other users to an account to help lower the cost. I share mine with my brother so we each pay $35/mo. I used to use an antenna but can't in my current area. If you can, that's a good option though.
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A few thoughts... In order from simple to more complex
- cut out Youtube TV in favor of antenna (free) and netflix (cheap), better yet, rent movies from the local library for free IF your wife agrees
-Shop auto and home insurance, make sure you aren't over-covered. We have two paid off old cars and pay $52 per month
-Pay the student loan off ASAP, simplify your life, get that $200 in cash flow back to the right side of the equation.
-$600 a month on groceries for a fam of 5 is very impressive IMO.
-make sure your wife is happy, if she gets $65 worth of value out of chiropractor, leave it alone, that isn't that much. Same for the young livin but I have no idea what that is... My point is, be respectful and don't come in assuming you get to dictate what is a priority and what isn't. That sounds like a recipe for a lot of arguing. Getting on the same page with your wife is more valuable than any advice related to the mechanics of what to do with your extra cash flow...
Speaking of... as for the extra 1225 per month to allocate... Follow the investment order you already mentioned. Do you have an emergency fund? I don't see one listed. If not, put it in a savings account until you do. Are you getting the full employer match on your retirement investments? If not, put more into your roth 403b until you get the full match. Next, start a Roth IRA through vanguard for you and one for your wife and put 6,000 per year into each one. That will pretty much take care of the extra 1225 per month.
I think you're doing a good job overall but my guess is that you are way underestimating your ACTUAL spending so instead of having an extra 1225 to work with you probably have substantially less than that to work with.
In terms of getting to FI faster there really aren't any shortcuts. Make more money, spend less money, invest the difference sensibly. It looks like you already follow a 78/22 stock/bond asset allocation. That is great, just keep adding more money to that whether it is in Roth IRA, Roth 403b or taxable accounts.
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For YouTubeTV, you can add up to six other users to an account to help lower the cost. I share mine with my brother so we each pay $35/mo. I used to use an antenna but can't in my current area. If you can, that's a good option though.
The other thing you can look at is Locast. While you can technically get it for free, it's $5 per month to avoid their added commercials.
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You are doing good to start. Have you read this: https://jlcollinsnh.com/stock-series/
His book The Simple Path to Wealth and the book Choose FI are very helpful and the library should have them.
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Ysette, the large majority of my investments are in a 403b in which I have plenty of room to increase the contribution. My only concern was getting them out prior to 59 1/2. They are a ROTH 403b, which in retrospect was a poor choice because I suspect my tax bracket will be lower upon retiring. When I first began investing I didnt know what I was doing, I just thought "It would be great to pull all of my money out tax free when I retire!" My health insurance is covered through work, my wife is covered by something called Medishare which is a christian sharing program that acts very much like High Deductible insurance and my kids qualify for nearly free insurance in our state based on my income.
Legalstache, I read Brandon's retire early link you included and if I understand correctly I could just open a "traditional" account 5 years prior to retirement, roll my Roth 403b into that account and then after 5 years I could withdraw it penalty free. Perhaps I'm misunderstanding though because mine is already a ROTH 403b. Traditional roth contributions can be withdrawn penalty free before 59 1/2 but I was told that a 403b Roth cannot?
Cincy, you're right - the savings are probably less than actually listed. As for an emergency fund, we don't have a set amount in our savings account but have plenty in the checking account that could be moved. What do you consider an emergency fund? Common guidance is 3-6 months of expenses, so I suppose we'll aim for that. We're going to be going after the students like it's a debt emergency. YouTube TV will be gone as soon as I buy an antenna and gain the courage to climb past 15 feet on my ladder. As far as 78/22 Stock bond, I have it setup for a Bogle Style 3-fund portfolio - this is one area I have felt very confident with. Your statement, "In terms of getting to FI faster there really aren't any shortcuts. Make more money, spend less money, invest the difference sensibly." Is the one I'm wrestling with. I feel like we're doing better than the majority of America, but that's not much of a bar to step over. I'm trying to wrap my mind around FIRE without a 6 figure income. Even living in an apartment in our area would barely benefit us - which is why I'm looking at any other areas to cut. Which appears to be cutting YouTube TV and any convincing I can do with my wife to fenagle her ventures.
Thanks for the input all.
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Contributions to ROTH's can be taken out penalty free at anytime.
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@Jwolfe yes, typically emergency fund is 3-6 months of expenses, but talk it over with your wife and come to a sensible amount together. I agree on the student loan strategy. Get that out of your life ASAP. As far as the antenna, you might not need to mount it 15 feet above your roof. I have a cheap antenna I've been using for over a decade that just plugs into my TV and sits inside right next to the TV and picks up all the local channels for free (ABC, NBC, CBS, FOX, PBS etc.) Try a cheap antenna first and see what channels it can pick up. You might have to do some positioning from time to time to get the signal clear but a small price to pay for free TV.
I like the 3 fund portfolio, simple and easy to stick with. I have a very similar strategy myself.
My point with the "no shortcuts" comment was that FI takes time, you have to stay patient. You are 33 years old so you've presumably only been working about 10 or 11 years assuming you took the typical path to college and then got a job. Making a 6 figure income helps but isn't required, it is all about the savings rate, as you know. Your expenses already seem pretty sensible for a family of 5 and your investment strategy is already good. That leaves increasing income as the main lever you can pull to speed things up. Can you focus on a side gig or get your wife interested in a part time job or a side gig as well? You shouldn't force this as she and you are busy raising 3 kids which is already a "full time job" and then some.
It sounds like you work as a public employee. Can't you add your wife and kids to your health insurance and cut down the $220 per month you're paying out of pocket for that? I pay 200 per month for a HDHP for a family of 4 through my private employer. I would assume as a public worker you could get something like that or even cheaper no?
For housing, you could also consider "house-hacking". This typically works better for people without kids but there are some families out there that do it. Basically you buy a duplex (or more) and rent out one unit and live in the other unit which can reduce your housing costs substantially. You need to run the numbers and figure out if it makes sense. You also have to deal with tenants and share your property though which, depending on the tenants, can range from fantastic to miserable but it's at least an option to discuss with your wife and see what she thinks. I'm in a similar situation as you in that housing is our biggest expense but my wife and I don't want to deal with tenant issues while we have young children in the house so you'll have to make your own decision on that, as with all of these suggestions.
Good luck. It's possible to reach FI on a less than 6 figure salary and with 3 kids, it just takes longer. Don't compare yourself to other people and feel bad about where you are. Of course you are better off than some people and worse off that others. That will always be true, just focus on what you can control and be patient.