Author Topic: New Mustachian case study (4 year update)  (Read 8614 times)

goosefraba1

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New Mustachian case study (4 year update)
« on: January 10, 2016, 08:31:58 PM »
Hello all,

I have been lurking here for a few weeks... and i would like to throw my hat in the ring. My wife and i are excited to start saving up for financial independence. We will be meeting with a financial consultant next month. I am a 28yo physician assistant working at my hometown hospital... recently got into my dream job in orthopedic surgery. My wife is a 29yo ccupational therapy assistant. We are about to make an offer on what very well could be a forever home. Lets go through our financials...

My current salary in occupational medicine: 89k/yr with up to 20% in bonuses (bonus was 14k this year).
My new contract with surgery: 119k/yr with up to 20% in bonuses. After 1 year, i will switch to an RVU system. Basically, if i meet my 75% of my numbers (300 rvus per month... get more in surgery), i keep my salary. Anything over that goes towards my bonus. The other two PAs in this practice regulalrly bring in 40-60k in bonuses on top of the 119k/yr salary.

My wife's salary: about 55k/yr.

So, I am guessing that we cleared about 160k this year together. We should clear about 190-200k next year, and closer to 220k to 240k there after.

Housing: we have done well to rent a very cheap house for the past year and a half. This has allowed us to put 40k into our bank account pretty quickly this year. We are looking at purchasing a very nice home at 210k. Can we afford more... yes... but we dont want to. The home is a ranch with a full basement... 1600 sq ft upstairs... same in finished basement. It has natural gas... and i will add a wood furnace to make heating even cheaper. House is equidistant from our workplaces. About a 15 minute drive either way. Great school district. About 2 miles from the school for when we have kids. We are getting 4.25 interest rate right now... going to shop for lower.

Transportation: I purchased a new Jeep Cherokee last year with a lifetime warranty. I need the 4wd where we live for winter time. I plan on this being my daily driver for a very long time. It is currently on a 7 year loan with low interest rate. I pay 550 per month to knock down the principle. My wife has an escape that will be paid off in 1 year. She pays 250 per month.

Student loans: The wife has about 5 years left on student loans at 250 per month. Me on the other hand.... i owe 160k in student loans. This a ton of weight! However, i pay on income based repayment. Currently at 380 per month. Will go to about 1000 per month this year. This sounds crazy, but it is what you have to do. Saving grace is that my employer is actually a non profit hospital. I have my payments setup so that after 10 years of payments on ibr, all other interest and principle will be forgiven.

Otherwise, after meeting with the financial consultant, we plan on maxing out our 401ks... and probably throwing some cash into an IRA. Obviosuly, we are young and new to this. Ready to let out money work for us!

What do you think? How are we doing? Beginner mustachians. Take it easy ;)
« Last Edit: July 20, 2020, 12:30:01 PM by goosefraba1 »

Kwill

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Re: New Mustachian case study
« Reply #1 on: January 10, 2016, 09:20:32 PM »
Welcome.

It sounds like you're making a lot of money but also carrying a lot of debt. Could you throw more of your income at your loans to get them out of the way faster?

I'm not sure what people here will think of a financial consultant. Is the person working on commission or on a fee basis? Financial consultants may tend to steer you to a particular variety of financial products that might in the long run be less beneficial to you than some other options.

goosefraba1

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Re: New Mustachian case study
« Reply #2 on: January 10, 2016, 09:35:41 PM »
Correct. We do carry quite a bit of debt right now. We will begin looking at what we can do to reduce this here very soon. The most of our debt is my student loans. By paying through IBR, we will be saving quite a bit long term. Our 10 year plan is to have all student loans paid off... and the majority of pur home paid off. I will still be driving my jeep because of the lifetime warranty ;)

In the meantime, there should still be some extra income that can go towards other investments.

The financial consultant that we are meeting with is a close friend of the family that works for a non profit. We will basically be discussing what we can invest in now in order to lower our taxable income. Taxable income is what the IBR is based upon. I would rather that some of this extra money go into retirement rather than paying off student loans... assuming that the majority of my loans will be forgiven anyway.

My number 1 upcoming project is making sure that we max out our 401k.

Last Night

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Re: New Mustachian case study
« Reply #3 on: January 10, 2016, 11:02:37 PM »
What is the interest rate on your student loan?
What is the interest rate on your car loan? What was the total purchase price?
How many miles do both of you drive to work each way?

From a very high level, I am looking at someone carrying a ton of debt, with two relatively new SUV's, looking to buy a home, not sure if focusing on 401k makes sense for you in your situation.

Sailor Sam

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Re: New Mustachian case study
« Reply #4 on: January 10, 2016, 11:33:07 PM »
The good news is that you and your wife are poised to be a very high earning couple.

The not-so-great news is your debt load.

You've got a plan use IBR for 10 years, then take the public servant forgiveness. But with a combined salary between 220k - 240k, you could easily pay the loans off in 2-3 years. You're also locking yourself into a public service job for a decade. That would make me nervous.

More information please. Specific loan amounts, interest rates, and monthly spending.

obstinate

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Re: New Mustachian case study
« Reply #5 on: January 10, 2016, 11:49:30 PM »
Yeah, I'd at least do a spreadsheet and see what the TCO of that debt is if you pay it off faster. That said, 160k, even without interest, would require $1600 a month to pay off over ten years. So I imagine you're better off with IBR -- UNLESS you could make $100k more working at a different place.

Your Jeep is not really a very mustachian purchase. You don't need 4WD unless there are no roads where you live. http://www.mrmoneymustache.com/2014/12/01/all-wheel-drive-does-not-make-you-safer/ I have also read that a lot of people who have owned a single Jeep for 15 years would not have broken even on the cost of the lifetime warranty when you factor in the deductible. Then there's the question of whether you're really gonna hang on to that vehicle for 15 years.

That said, it's water under the bridge at this point. Just something to consider for the future.

goosefraba1

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Re: New Mustachian case study
« Reply #6 on: January 11, 2016, 05:57:15 AM »
I actually do have all of our expenses written down at home. Not currently in excel. I will work on that soon. I do know that total take home savings each month (but not currently doing anything but going into savings) is $2600 per month (excluding housing... as we are about to buy a home... we have already included estimated utilities). This is not including bonuses... or my pay raise that I will soon be getting. After the pay raise, we are looking at approximately $3200 per month not doing anything but going into savings.

Wife's vehicle is a 2009 ford escape (with the hills that we live around... you do need awd for winters... ours are very steep). Total was 18k i believe. It is almost paid off... and just hit 100k miles. Mine is a 2014 Cherokee. Total was 36k can't remember the interest rate... I believe 3.5%... but it is written down in our notebook.

I know that some of our purchases (mainly my jeep) were non-mustachian. Water under the bridge. Time to move forward!

Miss Prim

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Re: New Mustachian case study
« Reply #7 on: January 11, 2016, 06:25:54 AM »
Are you planning on retiring early?  I ask because I was in the healthcare field (microbiology) and I really was not interested in retiring too early because my job was so interesting.  So, I put away about 20% of my pay and used the rest for travelling, owning a cottage on a lake, building my house on 4 acres and doing some serious gardening and raising chickens, and going back and forth between full-time and part-time as needs dictated. 
Other than those things, we were pretty frugal as we bought used cars, got rid of cable, didn't spend a lot on clothes, ect. 

If early retirement is not really your goal, I would still save as much as possible, but also loosen the purse strings and spend money where it will make you the happiest.  I don't regret my working life at all, and if it wasn't for increasing work loads and mandatory overtime that happened in my last year, I might still be working part-time.

                                                                             Miss Prim

goosefraba1

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Re: New Mustachian case study
« Reply #8 on: January 11, 2016, 06:44:53 AM »
Actually... it seems ridiculous... but i dont plan on retiring early, if ever. I love what i do, and will be even more entertained with surgery (my passion). My wife seems to have the same sentiments with her job. My short term plan is to eventually teach lab for advanced anatomy at the local college one evening per week. Long term is to try to start a PA program at the local university. I will try to continue full time surgery as well. I know that it is doable. I would probably get bored pretty quickly if retired.

Other spending things that we do...

Vacations: every year, i get 5k for continuing medical education CME. I can only spend it on CME, nothing goes in my pocket that i could put on student loans. So, last year i had a conference in San Francisco. Got a really nice room at the Westin for a week. We paid for my wife's ticket out of skymiles from our CSP card. Basically, a free vacation. We can do this every year! Travel is a great thing to spend money on. Makes your life feel longer.

We also took a trip this same past year to Costa Rica. Again, paid  for in CSP skymiles. I think we spent $500 total out of pocket the entire week while we travelled around the country via rental car.

Basically, almost all bills and expenses go on our CSP. I then pay it off in full every month. No excuses for late payments! They then pay our airfare and hotels when we travel typically :)

goosefraba1

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Re: New Mustachian case study
« Reply #9 on: January 19, 2016, 12:39:39 PM »
Ok.... so now that it has been a little bit of time... and I've been able to talk it over with the wife... here's an update. We have discovered that we have lots of variables that need to be determined in the near future.

Current Facts:
-My student loans owed 160k- this is on IBR currently. Remainder of the loan amount will be forgive through Public Service Loan Forgiveness in 2024.
-Wife's student loans owed 15k- interest rate is 3.5%. No Public service loan forgiveness available.
-My vehicle is 2014 Cherokee- original 36k- 32k left with interest rate of 4.5%. Probably going to refinance this. Going to try to pay it off sooner rather than later. I know... you guys are going to harp that I don't NEED this... and that is very true. I have a lifetime warranty. If I can keep this vehicle for 20+ years, it is well worth it to me.
- I also have a 2007 mustang that I am going to sell when it gets a little warmer/others start getting their tax returns (I live in a very poor/rural area... will probably sell it for 2500 due to it being a salvage title).
-Wife's vehicle is a 2009 Ford Escape- we bought used. Interest is 3.5% I believe... need to re-look at this one. I believe it has maybe 8k until it is paid off.
-My current income is 89k/yr + bonus (last year was 14k). New income starting in April is officially 109k base pay with up to 20% bonus for the first year. After that, it will go on RVUs (see above). The current PA at the practice averages between 40 and 60k bonus.

Future us:
- I plan to continue working until I no longer enjoy it! I love my profession as a PA. I can see myself able to work it indefinitely. My wife says that she feels the same way about Occupational Therapy. However, I would like to be able to call it quits at 55 or sooner if I want to. (I am currently 28, wife is 29). That gives us 27 years to build a big pot of cash!
- We currently have no children, but we are trying. We plan to have 2-3 children... whether they share our genetics or not.
- We are currently looking at homes. Our upper budget is 210k. However, I would be happy to buy a fixer upper for 160k and just enjoy working on it as we go. We haven't found one yet. I want a ranch style home with a basement and a garage... and natural gas heat.


So... we need help from here:
I am waiting to speak to a financial planner before we make any final decisions.
Obviously, we both need to up our current 401k to at least what our companies will match.

Where do we go from here?

Thanks for directions! Also... I know facepunch on the Jeep!

MDM

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Re: New Mustachian case study
« Reply #10 on: January 19, 2016, 01:50:32 PM »
So... we need help from here:
I am waiting to speak to a financial planner before we make any final decisions.
Obviously, we both need to up our current 401k to at least what our companies will match.

Where do we go from here?
Have you looked at http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/?

In particular, have you put your numbers into the spreadsheet linked in that post - and are you contributing as much to retirement as those numbers suggest you could?

goosefraba1

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Re: New Mustachian case study
« Reply #11 on: January 19, 2016, 01:52:17 PM »
I have not found that yet. Very new to the site! Thanks for pointing me in the right direction! Super newb here... I just want to get on the right track and do better for future me ;)

edit: Whoa... somebody has put some serious effort into this spread sheet. Much Appreciated!!!
« Last Edit: January 19, 2016, 01:55:37 PM by goosefraba1 »

Bracken_Joy

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Re: New Mustachian case study
« Reply #12 on: January 19, 2016, 02:01:01 PM »
I have not found that yet. Very new to the site! Thanks for pointing me in the right direction! Super newb here... I just want to get on the right track and do better for future me ;)

edit: Whoa... somebody has put some serious effort into this spread sheet. Much Appreciated!!!

I look forward to seeing your full case study!

The spreadsheet is awesome. Takes a bit to learn it, but there is SO much useful stuff there.

NESailor

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Re: New Mustachian case study
« Reply #13 on: January 19, 2016, 02:09:00 PM »
I'm curious where you may live that REALLY requires those vehicles for the winter.  The comment about warming up and refunds intrigues me as I live pretty far north and by the time I expect it to warm up for "spring", all the refunds will have already been spent.  And we drive an '05 Civic and an '09 Fit.  I've driven to Whiteface Mountain on a powder day in a Kia Sephia with balding all seasons and made it just fine (didn't bother with stop signs, though) so winter tires on current vehicles are more than plenty.

goosefraba1

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Re: New Mustachian case study
« Reply #14 on: January 19, 2016, 02:19:39 PM »
I'm curious where you may live that REALLY requires those vehicles for the winter.  The comment about warming up and refunds intrigues me as I live pretty far north and by the time I expect it to warm up for "spring", all the refunds will have already been spent.  And we drive an '05 Civic and an '09 Fit.  I've driven to Whiteface Mountain on a powder day in a Kia Sephia with balding all seasons and made it just fine (didn't bother with stop signs, though) so winter tires on current vehicles are more than plenty.

I live in Ohio... now that I look back, having AWD is a WANT and not a need. Working in healthcare (and especially surgery), I am expected to be at work regardless of snow conditions. However, when we do get snow (most we had last year was 18" on the ground at one time), the snow removal isn't up to par. On a normal snow day of only 3-4" I can definitely make do in the mustang. 18", I need ground clearance around here.

But, I am making excuses. It is definitely a want and not a need. I'm going to work on paying it off early as possible (if that is what the calculation computes to tackle first). And then I will keep and use the Jeep as long as possible according to the lifetime warranty.

Gracie

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Re: New Mustachian case study
« Reply #15 on: January 19, 2016, 02:39:03 PM »
1. Snow tires are the most important  for driving on snow.
2. If the snow is bad enough to keep you from work, most or all of the orthopedic surgeries will be rescheduled since they are elective.

goosefraba1

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Re: New Mustachian case study
« Reply #16 on: January 19, 2016, 06:03:47 PM »
Topic Title: New Mustachian Case Study

Life Situation: IRS filing status- Married filing separate, I'm 28 and wife is 29. We live in Portsmouth, OH. Looking for our first home (210k or below preferably).

Gross Salary/Wages: Me- This coming year 125K. Wife- 54K.

Pre-tax deductions: I believe that I am currently at 3% 401K (this will be upped to 7%- max matched by employer). I wasn't sure how to put that into the excel spreadsheet as this will be changing very soon.

Everything else is in the File I believe... actually a pretty good breakdown. Most of these were just approximates, except for the bills.

At this point, I know that this file isn't complete. I'm going to keep working on it as I gather more data from our 401Ks. Thanks for your help guys!


aFrugalFather

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Re: New Mustachian case study
« Reply #17 on: January 19, 2016, 06:20:47 PM »
Sorry to jump on the car bandwagon, but I'm curious (being a car guy) as to your numbers for the lifetime warranty, what does that cost you, what does it cover, and what is the deductible?

For your other numbers, it sounds like you are on the right track generally.  Good that you are not overextending on the house and good that you will have solid income to start paying down debts. 

Sailor Sam

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Re: New Mustachian case study
« Reply #18 on: January 19, 2016, 07:01:45 PM »
I looked at your spreadsheet. The great news is that you guys are netting 10k per month.

For a little perspective - your net monthly income is just $1600 shy of the annual income at the Federal poverty level. To be blunt, you have amazing resources; you should easily be maxing your retirement funds, and you should not be in consumer debt with those cars

Good Things
  • Your rent is very low. I am mildly jealous
  • Groceries are pretty good. My bills are around $300/month for one person, so I’ll throw no stone soup. Of course, this being MMM you can find many threads on making them lower still

Things Your High Income Makes Up For, But You Should Tweak Regardless
  • Your cable bill is crazy. Read the superthread on communications and fix this problem.
  • Your cell phone bill is also crazy. Cut it. Get Netflix. Heck, get Hulu and Netflix. You'll still come out way ahead.
  • Your monthly car insurance also seems high. I'd suggest shopping around.
  • Electricity seems high, but there are obviously a lot of variables there. Are you using electric heat? If so, can you get an energy audit. They are often free through the power company.

The Punches
  • The Jeep. No, you don’t really need it. Don't take it too hard, because I also have also have a car I don’t strictly need. The thing is, mine is paid off. For godsakes man, pay that sucker off. With $5,526 in unallocated money each month you could have the car note smote and smoking with in 7 months. No need to refinance, just pay it off. Do it, do it, do it right now.
  • Once you get the jeep paid, it’s just one and a half short months to kill the other car note.

Moving Forward
  • Once you’re out of car debt, start maxing your 401k and your IRA's. I'd assume at your tax bracket, a Traditional would be better than a Roth, however there are lots of advice threads with better wisdome than mine. At your income level, maxing these won’t even be a hardship.

Finally
  • Profit!!!!!
« Last Edit: January 19, 2016, 07:27:40 PM by Sailor Sam »

MDM

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Re: New Mustachian case study
« Reply #19 on: January 19, 2016, 07:24:56 PM »
Life Situation: IRS filing status- Married filing separate

Are you filing MFS by choice or because (for whatever reason) you have to?  At a quick look, there doesn't seem to be a reason MFS would be better for you than MFJ, but have you done a detailed look?

Rosy

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Re: New Mustachian case study
« Reply #20 on: January 19, 2016, 08:40:19 PM »
Have you already come across a site called whitecoatinvestor.com
It seems to be a great place for ideas specifically for the medical profession - worth a look:)

Start paying off your debts and deal with every expense item separately to see about reducing it. You are golden, but life is fickle, you never know what awaits down the road - so do it now.

Welcome to the forum - start poking around - there are threads dedicated to communication, cell, cable ... ask a mustachian thread ...

goosefraba1

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Re: New Mustachian case study
« Reply #21 on: January 20, 2016, 07:55:50 AM »
Sorry to jump on the car bandwagon, but I'm curious (being a car guy) as to your numbers for the lifetime warranty, what does that cost you, what does it cover, and what is the deductible?

For your other numbers, it sounds like you are on the right track generally.  Good that you are not overextending on the house and good that you will have solid income to start paying down debts.

Not a problem... I totally understand the sentiment... and honestly I appreciate it :) Lifetime warranty through Fiat-Chrysler America cost me $2800. It begins coverage after my original warranty is up at 30k miles. It covers everything that the original warranty covers at $500 deductible (doesn't cover headlights/brake lights, belts, tires, wiper blades). I was pretty torn on buying this honestly, however... we tend to go on a cheap annual drive somewhere nice... and we rack up the miles. With such a newer vehicle, I am worried about computer crap. If the computer goes out... this vehicle doesn't work basically. The way that I see it... if 100k  miles into this vehicle the computer goes out, that is a $4k fix. That alone justifies the warranty purchase. If I keep the Jeep 20 years (I will)... I am bound to run into some type of issue. Maybe not.

goosefraba1

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Re: New Mustachian case study
« Reply #22 on: January 20, 2016, 08:03:28 AM »
I looked at your spreadsheet. The great news is that you guys are netting 10k per month.

For a little perspective - your net monthly income is just $1600 shy of the annual income at the Federal poverty level. To be blunt, you have amazing resources; you should easily be maxing your retirement funds, and you should not be in consumer debt with those cars

Good Things
  • Your rent is very low. I am mildly jealous
  • Groceries are pretty good. My bills are around $300/month for one person, so Iíll throw no stone soup. Of course, this being MMM you can find many threads on making them lower still

Things Your High Income Makes Up For, But You Should Tweak Regardless
  • Your cable bill is crazy. Read the superthread on communications and fix this problem.
  • Your cell phone bill is also crazy. Cut it. Get Netflix. Heck, get Hulu and Netflix. You'll still come out way ahead.
  • Your monthly car insurance also seems high. I'd suggest shopping around.
  • Electricity seems high, but there are obviously a lot of variables there. Are you using electric heat? If so, can you get an energy audit. They are often free through the power company.

The Punches
  • The Jeep. No, you donít really need it. Don't take it too hard, because I also have also have a car I donít strictly need. The thing is, mine is paid off. For godsakes man, pay that sucker off. With $5,526 in unallocated money each month you could have the car note smote and smoking with in 7 months. No need to refinance, just pay it off. Do it, do it, do it right now.
  • Once you get the jeep paid, itís just one and a half short months to kill the other car note.

Moving Forward
  • Once youíre out of car debt, start maxing your 401k and your IRA's. I'd assume at your tax bracket, a Traditional would be better than a Roth, however there are lots of advice threads with better wisdome than mine. At your income level, maxing these wonít even be a hardship.

Finally
  • Profit!!!!!

I really appreciate this post. I had not thought about being so aggressive with paying off the Jeep... but I guess that makes a lot of sense if any house we get has a lower interest rate.

Something not showing up on the spreadsheet is my IBR on my student loans. Right now, I am paying $380 per month. This will jump up to an estimated $1100 in June.

Our rent is SUPER LOW for what we have. We have a 4 bedroom home in the country that is pretty nice. We are renting from a retired doc. They won't sell the house to us because it is a family farm. 2 other houses there... but we have 40 acres of horse pastures for our dog to run around on. This is what we have been using to save up our downpayment on a home. Electric heating in the current house that we are renting. Any home that we buy will have gas furnace for heat... and will be a ranch home instead of 2 story. Currently have 40K in the checking account. Not sure what the better option is... to save up 20% to avoid PMI on a home.... or to start putting that towards the Jeep to pay it off.

Stachetastic

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Re: New Mustachian case study
« Reply #23 on: January 20, 2016, 08:44:09 AM »
I'll chime in as another Buckeye.  210k will buy you a hell of a lot of house in Portsmouth, unless you're looking for quite a bit of land with it.  Also, snow accumulation is significantly less down there than in the northern half of the state--don't you tend to get more ice? If so, 4WD isn't going to help you much there.

Welcome to the forums!

goosefraba1

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Re: New Mustachian case study
« Reply #24 on: January 20, 2016, 11:32:25 AM »
In Portsmouth it will... if you are ok with your kids/future kids going to a crap school. Outside of Portsmouth, it just depends. We are waiting on finding a house that we can do a lot with. I don't have to have a lot of land... we have some parks where we can play. As far as snow... it really depends. It is kind of like an all or nothing thing here the way that the river valley funnels in snow. I've seen as much as 3 feet on the ground here before. We do occasionally have ice storms.

lampstache

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Re: New Mustachian case study
« Reply #25 on: January 20, 2016, 12:37:35 PM »
Great job throwing yourself out there and getting your finances on track!

My facepunch!

Now, I've got to say I'm struggling with the Jeep purchase and your reasoning. That is one expensive vehicle to "need" to have for the handful of times (maybe) a year the snow is too treacherous to drive on, at which point it might not be best to be on the road anyways if you can help it.

Having grown up in the Minneapolis area all my life I can confidently tell you that you don't need a pricey Jeep! In the last 4 years the lady and I have had 4 different cars: 2005 Honda CRV 2WD (Bought for 12k about 5 years ago and still own), 2004 Toyota Corolla (still own), 2004 Pontiac Grand AM (wife's old car that we sold), and a Toyota Prius (sold). We've driven through blizzards, ice, and -xx degree weather on our way to work, family events, etc.. and can confidently say you don't need a big SUV with 4WD to make it.

I get it, you make more than enough to pay for it so it's nice to have I'm sure and you'll manage. Like Sailor Sam said, get that sucker paid off fast and move on the next debt. Keep up the great work.

goosefraba1

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Re: New Mustachian case study
« Reply #26 on: January 20, 2016, 03:10:31 PM »
Hey guys.... I know that I am eating up some bandwidth here, but hear me out.

One of my avid hobbies is Disc Golf. It is super cheap, super fun, great community, and good exercise. My area has just begun to get started with 2 disc golf courses (one that I designed). I am debating on starting a small side business for selling Golf Discs. You can buy bulk at about $6 a disc most of the time and sell at $16-18 a disc.

Having said that, I think that it might be possible to claim the Jeep as the company vehicle? I could most likely allocate all of this extra money into actually paying off the Jeep! Just a thought. Has anybody done anything like this? I have close friends in Cincinnati and Lexington that have both done well with a Disc Golf business. One of them is claiming mileage to and from tournaments and such.

http://blog.myirstaxrelief.com/2008/06/company-car-benefit.html


MDM

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Re: New Mustachian case study
« Reply #27 on: January 20, 2016, 03:28:59 PM »
Having said that, I think that it might be possible to claim the Jeep as the company vehicle? I could most likely allocate all of this extra money into actually paying off the Jeep! Just a thought. Has anybody done anything like this? I have close friends in Cincinnati and Lexington that have both done well with a Disc Golf business. One of them is claiming mileage to and from tournaments and such.
Might work.  See https://www.mileiq.com/blog/when-is-driving-from-home-tax-deductible/ for a timely article.

goosefraba1

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Re: New Mustachian case study
« Reply #28 on: January 21, 2016, 08:57:57 AM »
Just checked. My employer only matches up to 2%.... I don't know why I was thinking it was so much higher. I have been putting 2% in on the 401k. Having said that...

Should I begin putting cash into an IRA for 2015 year (effectively lowering taxable income, and therefore reducing my IBR payments on student loans).... or just focus all of my money into paying off the Jeep?

Sailor Sam

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Re: New Mustachian case study
« Reply #29 on: January 21, 2016, 09:34:09 AM »
You should run the numbers, and see what maximizes your salary. If you lower your taxable gross income using an IRA, you'll increase your net pay. But if the interest on your loan is greater than the potential increase in net income, you haven't really won anything.

This isn't admonishment, just curiosity: I'm wondering why you're thinking of opening an IRA. You have access to a 401k, and you have a lot of room before you start maximizing that. Why not start contributing more into the 401k, instead of opening a second account? Are the 401k fees high?


goosefraba1

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Re: New Mustachian case study
« Reply #30 on: January 21, 2016, 09:55:58 AM »
This isn't admonishment, just curiosity: I'm wondering why you're thinking of opening an IRA. You have access to a 401k, and you have a lot of room before you start maximizing that. Why not start contributing more into the 401k, instead of opening a second account? Are the 401k fees high?

Great question. Like I have said before, I am only here to make myself better! I am currently contributing 2%. Just by going by the investment order in the excel spreadsheet (and I believe that I have seen this before on other sites), it suggests contributing into a 401k up to company match (check). Later on the list is to pay off high interest loans (working on that). Still later is contribute to IRA... still later is to max 401k.

Just by looking at that, it looks like the next step is to either hit that Jeep payment hard.... and then the IRA.... and then max the 401k.

Having said that, the lower that I can make my taxable income, the lower my payment will be on my IBR loans... which will later be forgiven in about 8 years. So, the less I pay on my loans, the more that I save all together :)

Does that make sense? Any changes that you would make to that?

So, basically, I need to run the numbers to see if paying off my Jeep is more value than pushing cash into the IRA (to reduce my taxable income----> lower IBR payments----> less money paid into loans that will be forgiven anyways).

goosefraba1

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Re: New Mustachian case study- Update 2020
« Reply #31 on: July 20, 2020, 12:04:38 PM »
Greetings! Alright so update 4 years later:

Family: 33yo me, 33yo wife, 3yo son, 1yo son

Employment: me- Orthopaedic Physician Assistant, wife- Occupational Therapy Assistant

Gross Income: me- 240k (130k salary, 110k bonuses last year), wife- 55k

Housing: Sold our old house 185k (sell by owner), owed 127k on it. +58k
              New home 390k (yes I know this is a lot... but in my home town, and everything we will ever need). Put 20k down with 3.3% interest rate. Also purchased 3acres adjacent for 40k.

Cars: paid off both the wifes Jeep GC and my Truck. -50k

Student loans: Me, still owe 160k. 4 years remaining on Public Service Loan Forgiveness (then done). Wife, paid off last year.

Currently: 90k in the bank. 90k in 401k (maximum contribution all in stocks). $8600 a month in expenses (this will go down to $6600 a month in 4 years as no more daycare or student loans). Net monthly income for both of us is about 12-13k. savings of about 5k per month.

Again, not planning on retire early, but working on FI.

Thanks for looking! We are spending quite a bit of money right now. I am trying to determine where to put the remainder of our monthly savings going forward.

 

tacticalteam4

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Re: New Mustachian case study (4 year update)
« Reply #32 on: July 26, 2020, 10:35:41 AM »
Wow, bonus ended up being much more than you anticipated eh? Congrats on all the progress! As fellow OR worker in PSLF eligible hospital with lots of student loan debt, hoping for some good promises from next president.

How would something like Bidenís proposed forgiveness of 10k/yr of public service up to 50k affect your loan repayment plans?

goosefraba1

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Re: New Mustachian case study (4 year update)
« Reply #33 on: July 30, 2020, 06:24:17 AM »
Wow, bonus ended up being much more than you anticipated eh? Congrats on all the progress! As fellow OR worker in PSLF eligible hospital with lots of student loan debt, hoping for some good promises from next president.

How would something like Bidenís proposed forgiveness of 10k/yr of public service up to 50k affect your loan repayment plans?

Thank you! The new home was not the most frugal of decisions. But... YOLO. We have 2 young kids and wanted to have a nice place to entertain ourselves and the family. 

Honestly, I'm not sure that it would affect me as I am now 6 years into the contractual agreement. From what I have been reading, any new plans for the PSLF will apply to the new enrollees. If for some reason it does affect me, then it will just make me more frugal and I will pay the remainder off ASAP as the interest rates for the loans are between 6 and 8%.

As we have maxed out the 401k, we are going to wait for the dust to settle and then begin looking at making double payments on the mortgage, maxing out the 457b vs backdoor and mega backdoor roths.

ontheway2

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Re: New Mustachian case study (4 year update)
« Reply #34 on: July 30, 2020, 08:10:15 AM »
It seems like your plan 4 years ago completely went out the window. A new Jeep with a lifetime warranty that you would drive for a very long time, but you now have a truck. You were buying a 210k forever home but just purchased a new house for 390k. Congrats on the huge bonus though?
« Last Edit: July 30, 2020, 08:13:32 AM by ontheway2 »

goosefraba1

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Re: New Mustachian case study (4 year update)
« Reply #35 on: July 30, 2020, 09:01:05 AM »
It seems like your plan 4 years ago completely went out the window. A new Jeep with a lifetime warranty that you would drive for a very long time, but you now have a truck. You were buying a 210k forever home but just purchased a new house for 390k. Congrats on the huge bonus though?

Yep. It is funny how having 2 kids change your life outlook. Also, my income almost tripled since my original post. We have no debt now other than the new house and my student loans (which will be paid off in 4 years assuming that PSLF is real and doesn't go down the crapper). Vehicles are paid off. I have maxed out 401k. Looking to max out 457b next I believe. Current net worth (minus student loans as I don't count them due to forgiveness) is now 300k.

So, I think we are doing pretty well. Definitely much better than 4 years ago. Could it be better? Yes! That is why I'm here!

Peaksandvalleys

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Re: New Mustachian case study (4 year update)
« Reply #36 on: July 30, 2020, 06:29:04 PM »
Ahhhh the system at work :) How refreshing.

Student Loans being forgiven for the family making 300K/year paid for by everyone else's taxes (including many who make far less than they do) so that they can buy new jeeps and trucks and homes every few years.

Congrats on your progress, you're doing well. But none of this is mustachian.

goosefraba1

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Re: New Mustachian case study (4 year update)
« Reply #37 on: July 31, 2020, 09:46:44 AM »
Ya... crazy how I can just pay a lower rate on my loans for 10 years and then have them forgiven for working in an undeserved area. I wonder where all my taxes go 🤔  Medicaid, Medicare, schools, roads, etc. Why is it ok for me to have to pay for everybody else, but my own taxes not be able to work for my own welfare? I would be totally cool having all of my taxes that I pay in exchange for paying my total student loan rate.

Regardless, maybe you guys are right. Maybe I don't belong here. Our goals probably aren't in direct alignment. I am planning to be able to have the ability to retire early, but as I enjoy my career maybe I won't.

Ahhhh the system at work :) How refreshing.

Student Loans being forgiven for the family making 300K/year paid for by everyone else's taxes (including many who make far less than they do) so that they can buy new jeeps and trucks and homes every few years.

Congrats on your progress, you're doing well. But none of this is mustachian.

bloodaxe

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Re: New Mustachian case study (4 year update)
« Reply #38 on: July 31, 2020, 10:11:45 AM »

I am planning to be able to have the ability to retire early, but as I enjoy my career maybe I won't.

Ahhhh the system at work :) How refreshing.

Student Loans being forgiven for the family making 300K/year paid for by everyone else's taxes (including many who make far less than they do) so that they can buy new jeeps and trucks and homes every few years.

Congrats on your progress, you're doing well. But none of this is mustachian.

New cars and new big @SS house will get you facepunches here. Especially if you don't need it.

Good work on the bonus, 84% of your annual take home!.

Never realized non profit work could be so lucrative.


goosefraba1

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Re: New Mustachian case study (4 year update)
« Reply #39 on: July 31, 2020, 10:22:28 AM »
I totally get it. The jeep was traded in towards the truck. The truck is paid off. My wife still drives her 2014 jeep grand cherokee. No plans on any other new vehicles unless I get a beater prius or something like that for trips back and forth to the outreach clinic that I do on Fridays 110 miles round trip.

The big ass house is probably the most ridiculous thing that we have bought in our LCOL area. However I also see people on here all the time with lower income and higher debt posting about 500k and up home in MCOL area or HCOL area.

Thank you for this discussion... and the face punches :)

 



I am planning to be able to have the ability to retire early, but as I enjoy my career maybe I won't.

Ahhhh the system at work :) How refreshing.

Student Loans being forgiven for the family making 300K/year paid for by everyone else's taxes (including many who make far less than they do) so that they can buy new jeeps and trucks and homes every few years.

Congrats on your progress, you're doing well. But none of this is mustachian.

New cars and new big @SS house will get you facepunches here. Especially if you don't need it.

Good work on the bonus, 84% of your annual take home!.

Never realized non profit work could be so lucrative.

Nick_Miller

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Re: New Mustachian case study (4 year update)
« Reply #40 on: August 03, 2020, 09:10:56 AM »
So you're 33, and you have $180K in investments/savings, paid-off vehicles, and put down a decent down payment on your home. You're doing a lot better than most people, so congrats on that.

But you're also spending a crap load of money. I get that having kids in daycare is expensive, we just left that phase a few years ago, so that's legit, but $8600 in expenses?  Does that include investment contributions or is that entirely post-tax household spending?

Either way, yes you're making progress, and yes if you keep making the $ you're making, you'll be fine. But be careful of building a prison for yourself. Not to generalize, but I think a lot of professionals do that.

I'll state the obvious and say that you have a butt load of eggs in the PSLF basket. I assume you have your crap together on the details (you seem like you do!), but a negative end result there would really change my assessment. I read a Forbes article earlier this year that said approval rate for PSLF is only up to 2%? Holy crap that is scary low.

goosefraba1

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Re: New Mustachian case study (4 year update)
« Reply #41 on: August 05, 2020, 08:01:50 AM »
Yes! The 2% approval the first year I believe had a lot to do with people submitting that didn't have 10 years with a 501c3 in an Income Based Repayment plan.

The 8600 is all after tax. $1000 a month currently for child care. $2300 mortgage and escrow. $800 a month currently for student loans. We are working on lowering other expenses in the near future.


So you're 33, and you have $180K in investments/savings, paid-off vehicles, and put down a decent down payment on your home. You're doing a lot better than most people, so congrats on that.

But you're also spending a crap load of money. I get that having kids in daycare is expensive, we just left that phase a few years ago, so that's legit, but $8600 in expenses?  Does that include investment contributions or is that entirely post-tax household spending?

Either way, yes you're making progress, and yes if you keep making the $ you're making, you'll be fine. But be careful of building a prison for yourself. Not to generalize, but I think a lot of professionals do that.

I'll state the obvious and say that you have a butt load of eggs in the PSLF basket. I assume you have your crap together on the details (you seem like you do!), but a negative end result there would really change my assessment. I read a Forbes article earlier this year that said approval rate for PSLF is only up to 2%? Holy crap that is scary low.

Peaksandvalleys

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Re: New Mustachian case study (4 year update)
« Reply #42 on: August 05, 2020, 02:28:00 PM »
Ya... crazy how I can just pay a lower rate on my loans for 10 years and then have them forgiven for working in an undeserved area. I wonder where all my taxes go 🤔  Medicaid, Medicare, schools, roads, etc. Why is it ok for me to have to pay for everybody else, but my own taxes not be able to work for my own welfare? I would be totally cool having all of my taxes that I pay in exchange for paying my total student loan rate.

Regardless, maybe you guys are right. Maybe I don't belong here. Our goals probably aren't in direct alignment. I am planning to be able to have the ability to retire early, but as I enjoy my career maybe I won't.

Ahhhh the system at work :) How refreshing.

Student Loans being forgiven for the family making 300K/year paid for by everyone else's taxes (including many who make far less than they do) so that they can buy new jeeps and trucks and homes every few years.

Congrats on your progress, you're doing well. But none of this is mustachian.

I apologize that my comment came off as insensitive. I don't blame you for taking advantage of the PSLF program, it is just frustrating that everyone who I know using the program is in a similar situation (very high incomes and high debt from professional school). It says a great deal about modern finance in this country that we are forgiving debt for those near the very top of the socioeconomic spectrum by use of a program which was originally pitched as a mechanism to help those who truly are taking a paycut to work in public service.

Let's be real, business tax filing status as a 501c3 does not actually mean you are sacrificing in the name of public service. You have an important job and help lots of patients, BUT an Ortho practice which extracts its business profits in the form of large bonuses and therefore operates as a "non-profit" is not exactly a huge sacrifice...

Once again well done, I would be plugging my nose and taking advantage of the program as well in your position. This just provides an easy opportunity to comment on the system and provide some facepunches regarding the multiple simultaneous large purchases

hazenp

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Re: New Mustachian case study (4 year update)
« Reply #43 on: August 05, 2020, 08:18:23 PM »
Just here to say congrats on the kiddos and your progress! Any details on investments?