Author Topic: Tightening the belt after a divorce, how does my plan look?  (Read 3849 times)

smisk

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Tightening the belt after a divorce, how does my plan look?
« on: August 30, 2023, 10:20:49 AM »
Life Situation: Going through a divorce has caused my housing expenses to go up (no longer splitting the mortgage) but I want to use this as an opportunity to look closely at my spending. While it's been emotionally difficult, the bright side is that I am much less interested in keeping up with the Jones' than my ex-Wife, and it's easier to track spending when I only have to account for myself. Really would like to get some more eyes on my budget and see if anyone has advice.

I'm 31, no kids, and live in a suburb in the DC metro area. Biggest opportunity cost I can see right now is that I'm living alone (or with 2 cats) in a 1500 sqft townhome, I could probably rent part of it for $1000, but right now I don't feel ready to as I've already gone through a big life transition pretty recently.

My car is a '22 Kona with a few years left on the loan. Thought about paying it off, or selling it for a older vehicle, but I have some attachment to it, and it's not a completely un-sensible vehicle.

For saving, I've only put a couple percent above matching into my 401k, gonna try and put more in towards the end of the year. I'm heavily weighted towards the taxable account which isn't ideal, though I've consistently maxed out my Roth. Savings rate isn't amazing, but I think I can live with it, and according to my projections I might hit my current 25x expenses number in 10-11 years.

The spending is semi-aspirational and maybe not completely realistic, but it's a good goal to shoot for (and a round number). I've tracked religiously for the past few years, but haven't been very good at curtailing my "fun money" (entertainment, restaurants, alcohol) so for the next few months I'm going to try and stick to the budget I've outlined below and see how it goes. All the other categories are realistic and based on past spending, though I recognize I haven't included anything for healthcare, as that should come out of my HSA, which I don't count as real spending for whatever reason. Now noticing that I didn't include clothes either (though I rarely buy these) so maybe my number will end up being 5% higher or so.

Ideally I would like to live closer to DC, in a more walkable/bikeable area, though I'll need a new job first, which is my goal for the next year or so. It's HCOL and I probably wouldn't be able to buy anything and maintain my current spending, but I think depending on the area I could rent a 1BR for something comparable to my mortgage. Not sure about my FIRE date, early 40s would be great but I have no idea what my future will look like - I would like to settle down with a partner again at some point, but I could go either way on kids.

Gross Salary/Wages: $97k / Take Home: $65k or $5400/month

Assets:
$240k Taxable Account
$83k ROTH IRA
$104k 401k
$10k Cash
$~150k Home Equity

Debts:
~$5k Car Loan, 3 years left @ 4%
~$255k 20 year Mortgage, 17 years left @ 2.75%

Current expenses:

Mortgage - $1950
Groceries - $250
Car Note  - $170
HOA        - $110
Gym        - $112
Internet   - $50
Utilities    - $110
Cell Phone- $37
Pet           - $60
Gas/Ins    - $150
Travel       - $200
Fun/Misc   - $300 (This includes restaurants, alcohol, streaming/magazine subscriptions etc)
Total: $3500

zolotiyeruki

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #1 on: August 30, 2023, 01:35:18 PM »
Are you looking for feedback on your proposed budget?  What's your long-term financial plan?

ixtap

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #2 on: August 30, 2023, 02:14:31 PM »
As a budget, I see no sinking funds for the next oil change, let alone more widely spread out expenses like appliance replacement, etc. Do you cut your own hair? When was the last time you took the pets to the vet?

Given that you have such a large taxable account, and consider it less than ideal, why not spend it down and max out your 401k? Heck, with your current income to spending, it doesn't seem like you should.even need to spend down your taxable to do so.

smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #3 on: August 30, 2023, 03:16:43 PM »
Are you looking for feedback on your proposed budget?  What's your long-term financial plan?

I guess just reassurance that I'm on the right track, or criticism as the case may be. I'd like to get to the point where I don't have to work full time as soon as I can, though I know I'm a ways off, and still need to do a lot of thinking about what I want my life to look like in general.

As a budget, I see no sinking funds for the next oil change, let alone more widely spread out expenses like appliance replacement, etc. Do you cut your own hair? When was the last time you took the pets to the vet?

Given that you have such a large taxable account, and consider it less than ideal, why not spend it down and max out your 401k? Heck, with your current income to spending, it doesn't seem like you should.even need to spend down your taxable to do so.

Good points. I do have a 10k emergency fund but that may not be sufficient, and more generally I should figure out how to budget for large, irregular expenses. I think maxing out the 401k is a good idea. In past years I was reluctant to put too much into retirement accounts in the event I retire early, but I recently learned about the whole roth conversion ladder thing.

Funnily enough my ex-wife did cut my hair, but that's now something I'm gonna have to pay for going forward lol.

Freedomin5

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #4 on: August 30, 2023, 04:17:53 PM »
Your expenses look okay to me. I wonder if the gym is absolutely necessary as there are many physical activities/ sports that are free, but if you use it religiously and donít have a home gym, then Iím not going to argue with that.

Your emergency fund should be 3-6x your monthly expenses. This is NOT your sinking fund, which is a fund for things that are planned expenses.

If you want to get to a point where you donít have to work (FI) as soon as possible, the formula is pretty simple. Look for ways to increase your income, lower your expenses, and stash away the difference.

MDM

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #5 on: August 30, 2023, 04:20:17 PM »
How do the suggestions in the Investment Order post look to you?

HPstache

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #6 on: August 30, 2023, 04:27:14 PM »
+1 for sinking funds for big expenses / known non-regular payments.  Here are some examples from my budget:

-Major House fund (appliances, roof, furniture, etc.)
-Major Auto fund  (tires, brakes, repairs, etc.)
-Bi-yearly life insurance
-Laptop/Phone/technology
-Amazon Prime subscription
-License/tabs
-Haircuts

lhamo

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #7 on: September 03, 2023, 08:53:20 AM »
Is your location suitable for hosting people in a short-term rental?  If you are near a university you might want to check with graduate programs to see if there are students (or faculty) with a long commute who could use a crash pad a few nights a week.  Or you could target people who are coming to DC for short-term trainings/conferences/work events. 

FWIW $1950 for a whole townhouse doesn't seem unreasonable to me.  We just moved into a rental house in Seattle -- 3br/2ba 2400 sq ft with a decent yard -- and are paying $3445.

As you ramp up social activities post-divorce try to focus your energy on lower cost things that also build a community of like-minded people.  Have people over to your house for coffee/drinks/dinner/brunch rather than going out all the time.  Have a potluck night once a month or once a quarter and invite your neighbors.  Experiment with things like in house movie nights or game nights, etc.  If you get a nice group of people who like sharing those kind of experiences and you can rotate from house to house, you will get an active, engaged social life at much lower cost than is typical. 

RE: subscriptions, have you checked with your local library system to see what they have available?  My system has tons of magazines and newspapers (many available digitally) and also some streaming services and self-education resources.  Consider experimenting with what you can get for free for 6-12 months, then add back in the paid services if you find you really miss them.

Can definitely go lower on cell phone service.  I use Mint Mobile, which is on the T Mobile network.  I'm on wifi most of the time so the lowest data plan at $15/month works fine for me (I sometimes buy extra data when travelling as needed).  I actually got it for $7.50/month for the first two years through a black friday special.  I can send you a referral code if you are interested in trying it (we both get a credit that way).

Cassie

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #8 on: September 07, 2023, 10:18:00 AM »
Also many hoaís donít allow short term rentals of 30 days or less. I live in a condo and this is one of our rules because we donít want people to Airbnb their units and have all the headaches that go with it.

smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #9 on: September 07, 2023, 01:46:27 PM »
Thanks for the advice all! I'm pretty close to the investment order but will probably tweak a few things.

I am fairly close to a large university, I might look into the idea of renting a room out to students some of the time.

Also good advice on the sinking fund, I had to spend $50 at home depot to repair my fence last weekend so it will be good for stuff like that.

After taking a closer look at my budget I'm sadly realizing I won't quite be able to hit $3500 a month, my pet expenses are a bit higher than I posted earlier and I know there's other things I'm probably not accounting for. But I'll keep tracking things over the next few months and try to see where else I can make adjustments.

@lhamo I like your advice for building a social life, definitely something I need to focus on!

Catbert

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #10 on: September 16, 2023, 11:29:38 AM »
Don't pay any extra on your very low interest rate mortgage.

If you want to have more money in 401k and less in your taxable account, but don't want to generate capital gains by selling, change what happens to your dividends and internal capital gains.  Have them pay out rather than be automatically reinvested.   That'll give you more cash so you can divert a bit of your paychecks to increase 401k contributions.  You may want to wait a few more months of living on your new budget to see how it goes before making any radical changes.


smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #11 on: September 18, 2023, 08:38:56 AM »
A friend asked if I'd want to move in with him, and his other roommate, as they are looking for a third person. Am I crazy for considering selling my house after only three years, and with such a low interest rate? According to Zillow, it's already appreciated over 20% (though who knows how accurate that is), and if I split the rent with them my monthly expenses would probably go down by close to $1000.

The big kicker is that they need someone by November and I'm not sure about how long it would take to get the house ready to list, not to mention sell etc. Seems a little rushed, but part of me thinks it'd be nice to have a fresh start.

SailingOnASmallSailboat

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #12 on: September 18, 2023, 01:12:35 PM »
could you rent out the townhome?

smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #13 on: September 18, 2023, 02:25:17 PM »
Renting it out is definitely a possibility, but I'm not sure I want to be a landlord, and I don't think I'd make much after expenses since it's a 20 year loan. Best argument for renting it out would be hedging against future housing inflation, if I want to move back there in the future.

zolotiyeruki

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #14 on: September 18, 2023, 02:50:33 PM »
Save $1k/mo, plus freeing up $150k of home equity for investment in (fill in the blank)?

I guess a better question is: how would such a move impact your lifestyle?

smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #15 on: September 25, 2023, 08:31:48 AM »
After meeting with my friend and his roommate this weekend I'm more strongly leaning towards moving in with them. I think we'll be able to get along well, and I often feel lonely having the house all to myself so it'll be nice living with others.

We're looking at rental houses now and I think we'll be able to find a pretty nice place that is within our price range. Over the next weeks I'm gonna start getting rid of stuff and fixing a few minor things on the house to prepare it to sell. It's too bad about losing the mortgage, but it'll be nice being more liquid.

 I have a slight fear that I'll never be able to afford to buy a home again what with interest rates and the rapidly appreciating home prices in the DC area, but I'm not completely opposed to being a renter forever, and you never know what the future will bring.

Cassie

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #16 on: September 25, 2023, 08:57:29 AM »
After meeting with my friend and his roommate this weekend I'm more strongly leaning towards moving in with them. I think we'll be able to get along well, and I often feel lonely having the house all to myself so it'll be nice living with others.

We're looking at rental houses now and I think we'll be able to find a pretty nice place that is within our price range. Over the next weeks I'm gonna start getting rid of stuff and fixing a few minor things on the house to prepare it to sell. It's too bad about losing the mortgage, but it'll be nice being more liquid.

 I have a slight fear that I'll never be able to afford to buy a home again what with interest rates and the rapidly appreciating home prices in the DC area, but I'm not completely opposed to being a renter forever, and you never know what the future will bring.

Instead of looking at rental houses why donít your friends move into your house and pay rent? That would make it possible to keep the house and not be lonely.

smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #17 on: September 26, 2023, 07:29:14 AM »
Instead of looking at rental houses why donít your friends move into your house and pay rent? That would make it possible to keep the house and not be lonely.

We did talk about that - it would be ideal from a financial perspective, but we decided my home is a bit too small for 3 adults living in separate rooms. It has 3 bedrooms, but one is tiny, more like a nursery or office than something we could comfortably live in.
We should be able to find something large enough for ~$3k a month, which would be doable for all of us, and should let me really increase my savings rate for awhile.

smisk

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Re: Tightening the belt after a divorce, how does my plan look?
« Reply #18 on: December 14, 2023, 12:10:52 PM »
Might as well update here - I moved into a new rental home with two friends (paying $1000/month for my share) and just accepted an offer on my home for $30k over the list price! Even after I give my ex her portion, I should end up with ~$140k in cash which feels absolutely insane to me. I think I'll donate some and put the rest in an index fund.

Things have been so hectic with moving and getting the house ready to sell that I haven't been keeping track of expenses lately, but they should end up being significantly lower, I'll get back to my spreadsheet in the new year.

Feeling good about things, next I just need to focus on getting a new job. I'm sure I could be making more, and there are a lot of companies within a mile or two of my new place. Would be nice to commute by bike.