The Money Mustache Community
Learning, Sharing, and Teaching => Case Studies => Topic started by: mizzourah2006 on May 12, 2020, 10:01:15 AM
-
I don't know what kind of guidance I'm specifically looking for, just in that part of the journey where everything seems slow so I figured I'd post what we're doing and see if anyone had any thoughts. I'd say we're not as frugal as MMM, but not as spendy as most of my friends. Somewhere in between.
Income: It's been steadily rising over the past few years, but I do largely expect we're close to our peak unless we move to a HCOL area, which I don't really want to do given we like where we are at.
Family of 4: 36, 34, 4, 2
Expected Income this year (Have to say that given the uncertainty of what's going on right now):
- Adult 1: Base salary: $189k; Bonus: $17.5k (already paid); Company Ownership: ~$20k (shares of a privately held company)
- Adult 2: Base salary: $45k; Bonus: $18-$20k (2 of the 3 have already been paid).
Total income (excluding stock): ~$270k
Expenses (Monthly averaged out over the previous 12 months):
- PITI: $1,151
- Cable/Internet: $85
- Health Insurance: $300
- Car Insurance: $65
- Utilities: $220
- Cell Phones: $54
- Groceries: $470
- Restaurants: $115
- Daycare/Preschool: $1,350
- Gas/Oil Changes: $140
- Entertainment: $200
- Kid Related Expenses (diapers, clothes, Tippi Toes, etc.): $110
- Personal Expenses (new clothes, new cell phones, makeup, etc.): $150
Total/Month: ~$4,400
Then throw in big stuff that comes (vacations, home-related expenses, etc.) up we're usually between the range of $60-$82k/yr in expenses. Last year was the highest since I've started tracking in 2016 ($82k) because we redid the floors in our home and we got into Mountain Biking, so we spent about $7k on bikes and equipment for the two of us. This year as of now we're on pace to spend about $62-$65k.
Savings:
- HSA: We max this out every year
- FSA: We have one through work that allows us to deduct up to $5.5k in daycare expenses we do this every year
- 401ks: We max out both 401ks every year, but neither have much by way of matching.
- Roth IRAs: Until this year we maxed those out each year, but it's looking like we might not qualify for one this year and we both have traditional IRAs from rolled over 401ks from previous jobs so I don't think a backdoor is an option. It may be for me because mine is only ~$5k in traditional IRAs but my partner has almost $30k.
- 529s: We put $4k/yr in each child's 529, so $8k/yr.
For assets, I want to add a small caveat that we've only been saving for about 7 years despite our age because I didn't get my first full-time job until 29. Until that point I was finishing up my PhD.
Assets:
Investments (401ks, IRAs, Brokerages): $690k
Home: ~$285k
529s: $28k
Cars: ~$35k
Liabilities:
Mortgage: $146k
Goals are to have about 1.5 million in investments in the next 4-5 years and 2 million in the next 7-8 years and then decide what to do at that point. I feel like as far as expenses go we're not as frugal as can be, but not spendthrifts either with about 40-50% of our annual expenses going to daycare and our PITI. I guess it's just continue what we're doing, but we're at the boring phase, lol. So figured maybe some others have some thoughts.
Definitely open to thoughts on potentially still continuing to do the Roth via backdoor, but concerned mine may be the only option given that my partners' has $30k in it.
-
You're probably not getting any replies because (as you know) you certainly don't HAVE to do anything -- you're basically on autopilot for early retirement at this point.
I'm pretty sure we live in the same area (we're in the town with the university), so I can nitpick some of your expenses if you want.
- Cable/Internet: $85
We pay $45 to Cox for 10 Mbps. We stream plenty of Netflix, etc without ever any buffering. They also increase the speed to 50Mbps for free during COVID. I haven't really noticed any difference (telling me 10Mbps is fine under normal circumstances), but I can't say whether it would have been enough for all the the video calls my wife has been on for work.
- Car Insurance: $65
If this is for 2 cars, then it's probably pretty good. You could check out Geico which I've found to be crazy cheap in this area compared to any other company I've gotten a quote from. You could consider dropping to 1 car if that's feasible given where you both work and where you live.
- Utilities: $220
We live in a 750 square foot apartment, we're 2 people not 4, and we're a little extreme with our temperature settings (60 in the winter, 80 in the summer), so consider this just a counterpoint of what's possible if you go nuts. Water/sewer/trash is usually $50-60 (up a bit during COVID with my wife also working from home). If we owned I bet there are some more efficient shower and toilet options that could bring this down. Electric is usually $60-80 in the winter, $40-50 in the summer and $30-40 in the shoulder seasons when we aren't heating or cooling for an average of $45 or so throughout the year.
- Cell Phones: $54
I bet this could come down. Check out https://www.redpocket.com/. We each have a $60/year plan with 100min/100text/500MB per month, but that requires using google voice for most calls and careful data management (wifi at home and work makes this not really a problem). You could save money even with much larger plans. Check out the annual plans for the best savings.
- Groceries: $470
I have no idea how much kids cost to feed. We average more like $280, but it seems to be going up a bit with COVID for some reason (a bit of stocking up so we could skip a few grocery runs if needed, maybe slightly higher prices, and no work provided meals for my wife). My biggest tip on this one would be to embrace Aldi. Walmart is good for the things you can't find there, but try to adjust to what Aldi offers and I bet your Walmart list gets pretty short.
- Restaurants: $115
- Entertainment: $200
- Personal Expenses (new clothes, new cell phones, makeup, etc.): $150
These are obvious. Leave 'em if you're happy, cut 'em if you want.
- Gas/Oil Changes: $140
This is high, so I'm guessing you live a bit away from work? I work from home and my wife walks to work (except she's working from home right now), so we fill up once a month if that, which also reduces oil change frequency. This kind of thing requires large structural changes to your life, but it's pretty great living within non-car commute distance of work, so worth consider now or if you move for a new job sometime.
As far as the backdoor Roth, check to see if either of your 401(k)s would let you roll the IRAs into them. Make sure they know these are rollover IRAs because some plans will allow a rollover IRA to be rolled in even if they won't allow contributory IRAs to be rolled in.
-
You’re doing well. Just keep socking away your cash.
My one question is whether you have life insurance? Ideally, you should have policies on both parents, but it’s particularly important to have insurance on the higher earner because the lower earner does not make enough to support your current lifestyle.
-
You're probably not getting any replies because (as you know) you certainly don't HAVE to do anything -- you're basically on autopilot for early retirement at this point.
I'm pretty sure we live in the same area (we're in the town with the university), so I can nitpick some of your expenses if you want.
Thanks for the thoughts. Haha, I imagine I probably live about 10 miles north of you. Small world. I'll try to address them with some additional context if at all relevant.
- Cable/Internet: I'll have to check out Cox internet. I have ATT&T right now. I do splurge a bit on cable, but I'm from Saint Louis and the only way I can get Cardinals baseball is with cable. If it weren't for that I'd almost certainly cancel. In fact since discovering how well vpns have improved over the years I might just drop it and pick up the mlb.tv package. So I admit cable is completely unnecessary and without live sports we aren't even really watching it right now. Definitely a splurge on my part.
- Car Insurance: We have Geico and this is for 2 cars.
- Utilities: We do the same with temp settings. My spouse forces me to move it up to 65 at night because of the kids, but we keep it at 60 in the winter during the day and 80 in the summer during the day. Turn it down to 76 at night in the summer. Water/sewer/trash is about $75/month with kids baths and such.
- Cell Phones: Again, I use it for work as I work from home. I'll look into those plans, but $54/month for 2 phones with unlimited minutes/text and 10GBs of data/month that rolls over to usually give us about 16-18GBs a month is one of the cheaper I've found. My old plan was over $100/month. Maybe I'm reading it wrong, but the one that appears to have 5GBs of data would save us about $10/month (but may not be enough) and the one that has 15GBs of data would cost us about $10-$12 more per month, seems like the one fairly identical to ours if they offered it would be about the same price. But this is an awesome find because my current plan is a bit of a work around that could go away at any second. I really appreciate this link as I may be using it in a few months :)
- Groceries: We go to Aldi's, but not as often as we used to. Ever since Walmart started offering grocery pickup my spouse much prefers that option. This way we don't have to take 1-1.5 hours out of our weekend to do a grocery trip. But we have definitely noticed our grocery bill has been creeping up. I'd imagine if we were perfect with groceries we could shave another $50-$70 off that, but like you mentioned this is also including Covid where kids were eating at home for every meal.
- Gas/Oil Changes: I work from home, but my spouse goes in and we have to take the kids to daycare. ~ 3 oil changes a year at $60/per and then we also travel on weekends probably once every 6 weeks to visit family (under normal conditions). This typically involves drives to Saint Louis or Kansas City. If you subtract out my drive to KC to help my dad move at the beginning of March so far this year we've averaged spending about $70/month on gas. I also am a pretty avid mountain biker, so I drive to local trails at least a couple of times a week.
As far as the backdoor Roth, check to see if either of your 401(k)s would let you roll the IRAs into them. Make sure they know these are rollover IRAs because some plans will allow a rollover IRA to be rolled in even if they won't allow contributory IRAs to be rolled in.
Interesting thought. I hadn't thought about that. Especially for hers. I'd be fine just biting the bullet and taking an extra $4-$5k in income on mine for one year to get that all into a Roth, but if her company allows a rollover IRA to be rolled into her 401k that would free up her IRA for backdoor conversions. Great suggestion! I'll definitely look into that.
You’re doing well. Just keep socking away your cash.
My one question is whether you have life insurance? Ideally, you should have policies on both parents, but it’s particularly important to have insurance on the higher earner because the lower earner does not make enough to support your current lifestyle.
Very valid point. My spouse (the low earner) does have a 15 yr term policy for $500k. I've been trying to lower my weight to get to a "healthy BMI". I am healthy, but I was a football player and a powerlifter for a while, who still lifts regularly, so my BMI puts me in the obese category despite the fact that in reality I'm probably only 20-22% bodyfat. I'm giving myself until end of July to get to a BMI of about 29 and then I'm going to bite the bullet and pay the extra premium for myself. I wish they would do it on something other than weight. Can I run a 5k for them? I could probably run a sub 27 minute 5k with a months worth of semi-serious training :) (Could do sub 30 tomorrow) But life insurance apparently doesn't care to differentiate muscle mass from adipose mass.
-
Sounds good.
We had AT&T and find Cox to be faster/more reliable. It's not available in our town, but in surrounding areas there's a coop electric company offering 1Gbps internet for $50/month without gimmicks that I'd jump on if we could get it. I won't say the name as that would reveal where we live, but I can PM you if you can't find it.
I'm surprised your utilities are as high as they are given what you've written. Your house is probably a good bit bigger than our 750 square foot apartment?
Agreed on the cell phone plan. If you want to replicate your current limits you're probably better off where you are. You might consider giving some thought to whether you need that much data. Especially since you work from home you might be able to get your usage down quite a lot. You really don't need much data unless you're streaming movies/music while on the go. You can even download maps, podcasts, etc. I think music can only be downloaded if you buy the premium streaming services, which kind of defeats the purpose.
I've seen instacart signs at Aldi. The fees might eat up the savings though.
Another option on the Roths if you/she have any self employment income would be opening a solo 401(k) into which you could roll the IRA.
You might want to get on the term insurance sooner rather than later. I've seen some posts from BruDude on the Bogleheads forum (https://www.bogleheads.org/forum/search.php?author_id=23033&sr=posts) (a very informative and helpful life insurance salesman) suggesting that you just get it since you can always get another plan if your numbers improve. Here's a good place to find local agents who sell term insurance: https://www.term4sale.com/. Also sign up for accounts at https://ssa.gov and find out what your survivor benefits would be and weigh that into your decisions about how much insurance to get.
-
Sounds good.
We had AT&T and find Cox to be faster/more reliable. It's not available in our town, but in surrounding areas there's a coop electric company offering 1Gbps internet for $50/month without gimmicks that I'd jump on if we could get it. I won't say the name as that would reveal where we live, but I can PM you if you can't find it.
I'm surprised your utilities are as high as they are given what you've written. Your house is probably a good bit bigger than our 750 square foot apartment?
Agreed on the cell phone plan. If you want to replicate your current limits you're probably better off where you are. You might consider giving some thought to whether you need that much data. Especially since you work from home you might be able to get your usage down quite a lot. You really don't need much data unless you're streaming movies/music while on the go. You can even download maps, podcasts, etc. I think music can only be downloaded if you buy the premium streaming services, which kind of defeats the purpose.
I've seen instacart signs at Aldi. The fees might eat up the savings though.
Another option on the Roths if you/she have any self employment income would be opening a solo 401(k) into which you could roll the IRA.
You might want to get on the term insurance sooner rather than later. I've seen some posts from BruDude on the Bogleheads forum (https://www.bogleheads.org/forum/search.php?author_id=23033&sr=posts) (a very informative and helpful life insurance salesman) suggesting that you just get it since you can always get another plan if your numbers improve. Here's a good place to find local agents who sell term insurance: https://www.term4sale.com/. Also sign up for accounts at https://ssa.gov and find out what your survivor benefits would be and weigh that into your decisions about how much insurance to get.
Yeah on the utilities our home is 2.2k sq ft. So nothing huge, especially for this area, but not terribly small. We do have a ton of windows and our HVAC system is about 16 years old, so it could be just incredibly non-efficient. We usually float from ~$25-$150/month with gas and from $70-$150/month with electricity. Our HVAC is on its last legs, but gonna keep it as long as it keeps chugging along.
I almost had self-employment income consulting, but it fell through, so nothing other than work pay. I definitely need to get on the life insurance stuff. Thanks for that link, I'll take a look at some local offerings.
Great things to think about and suggestions. Very much appreciated.
-
I would not convert into a Roth IRA during your highest earning years. You will be paying taxes at your highest tax bracket ever.