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[jehovasfitness23]

Hi all,

First time poster, looking for some general advice. Thus putting it here rather than the investing forum.

Married couple 39 and 35, no kids. Not looking to retire before age 55-60.

With current world issues my job stability is rather high, local city gov't that's well funded.
Wife the main income earner works for a company that assists airlines. So far, her job is stable and given her position should be moderately stable unless company goes bankrupt.

See as she's the main earner and her job is less stable, trying to plan ahead.

Stats:
Gross income $175k/yr combined
Emergency fund: 1 year worth of cash, enough to pay off car but only have about $7k left or roughly 3 months EF
Retirement accounts 401k + HSA = $165k
Mortgage $2100/mo
Debt: 1 car loan $28k balance paying $1k/mo at 4% interest

Currently was contributing to the match on both our retirement accounts, but since stocks went way lower, I front loaded her contributions to max her 401k out for the year.

I have the option to do same, plus I have 401k and 457b option.

Seeing as we are in the I think 22% tax bracket, it seems to make sense to me to max out my retirement account as well.

We were saving for some house renovations but that has been put on hold so there's not a need for a large pile of $$$ so another reason to up our retirement.

That said, I also worry that if she loses her job having more $$$ helps me sleep at night.

However, worst case scenario as I see it, and I may be wrong, if we up the retirement funds now and worst case hits, with the new law changes we could access our 401ks penalty free for the cash, but if we never need it soon then that money obviously adds to retirement.

Sorry for the ramble. Thoughts on if we should max out this year 401ks, even mine, if that means saving less $$$ in the bank?

[Viking Thor]

If I were you I would for sure get any free 401k match.

Then I would defer the decision on whether to max until later in the year, so you have a better view of your continued job security and overall economy.

E.g now just contribute to get match and save the rest, and then just plow money into the 401k at end of year if things seem ok (some places let you contribute 90-100% of your paycheck to 401k).

That's kind of what I do every year, I contribute 6% year-round to ensure i get full matching, then in November if everything looks ok I adjust and bump way up for a few paychecks to max out.

[MDM]

Take a look at Investment Order.  How does that fit your situation?

[lhamo]

Can you cover your basic monthly expenses with your take-home only?  If so then I would continue to max tax advantaged accounts. If not then I would probably want a slightly bigger cash reserve just in case her job goes south -- larger if her skill-set is air industry specific as that sector is going to take a loooong time to rebound, smaller if she could easily transfer skills to another job that has decent demand or if she has the potential to consult or start her own business.

[jehovasfitness23]

Can you cover your basic monthly expenses with your take-home only?  If so then I would continue to max tax advantaged accounts. If not then I would probably want a slightly bigger cash reserve just in case her job goes south -- larger if her skill-set is air industry specific as that sector is going to take a loooong time to rebound, smaller if she could easily transfer skills to another job that has decent demand or if she has the potential to consult or start her own business.

We cannot. My take home pay minus 401k match and HSA maxed out ($3000ish for the year) leaves me with $2900 take home. Though 2 x a year since I get paid bi-weekly there's essentially an "extra" paycheck.

I also have a small side biz that brings in $4k-6k/yr. Even with that we cannot.

Once we get rid of the car payment it would still not be doable.

Expenses are generally $6500/mo which $1k of that is the car note. $2100 mortgage + property taxes.

She's in communications so it's not industry specific but I'd also assume it's not a high demand job seeing as positions for it would be limited at companies.

[jehovasfitness23]

If I were you I would for sure get any free 401k match.

Then I would defer the decision on whether to max until later in the year, so you have a better view of your continued job security and overall economy.

E.g now just contribute to get match and save the rest, and then just plow money into the 401k at end of year if things seem ok (some places let you contribute 90-100% of your paycheck to 401k).

That's kind of what I do every year, I contribute 6% year-round to ensure i get full matching, then in November if everything looks ok I adjust and bump way up for a few paychecks to max out.

I like that idea, but if I wait too long my ability to max out will not exist since I won't have a big enough paycheck to max out from. In fact, based upon my last calc, IIRC, if I don't start within next few weeks I will not be able to max out my 401k, let alone that and the 457

[Dicey]

I'm raising my eyebrow at your numbers. They don't seem to add up and your spending looks on the high side. You're going to get better help (and possibly more facepunches) if you start a case study. You will also get great advice from some really smart people.

[jpdx]

I too would be concerned about that car payment. Can you get yourself some less expensive transportation?

[jehovasfitness23]

I too would be concerned about that car payment. Can you get yourself some less expensive transportation?

I agree. Could we, absolutely. I've thought about it. But we both get great enjoyment out of it when weather is nice, it's a Jeep.

[jehovasfitness23]

I'm raising my eyebrow at your numbers. They don't seem to add up and your spending looks on the high side. You're going to get better help (and possibly more facepunches) if you start a case study. You will also get great advice from some really smart people.

What doesn't add up?

I agree, budget could be lower, but other than the car payment, I feel we're pretty "frugal". Likely could trim the grocery budget a little. It's our next highest item beyond the house and car.

[dignam]

I agree. Could we, absolutely. I've thought about it. But we both get great enjoyment out of it when weather is nice, it's a Jeep.

I assume it's a Wrangler?  They're about the only Jeep that holds its value well.  $1k/mo is a huge car payment.  If it's a Wrangler you could probably sell it and not take a huge hit.  Just buy an older used one then.  I had a '01 Wrangler and loved the thing, although very impractical.

[jehovasfitness23]

I agree. Could we, absolutely. I've thought about it. But we both get great enjoyment out of it when weather is nice, it's a Jeep.

I assume it's a Wrangler?  They're about the only Jeep that holds its value well.  $1k/mo is a huge car payment.  If it's a Wrangler you could probably sell it and not take a huge hit.  Just buy an older used one then.  I had a '01 Wrangler and loved the thing, although very impractical.

Correct, a wrangler. Actual payment is $850, still high I know, but paying $1k just to get it paid off sooner. Right now the loan is 4% rate and we have the cash to pay off but it's earning 1.5% in a savings account.

I believe we have about $10k equity FWIW.

At current driving conditions, I expect to have it for another 10 yrs or so.

[wageslave23]

You're cruisin' for a facepunch...  If you want one, let us know.

[jehovasfitness23]

You're cruisin' for a facepunch...  If you want one, let us know.

Being new around here I'm not sure what that means. I assume it's a virtual punch to the face for spending so much on a car lol

[Paper Chaser]

However, worst case scenario as I see it, and I may be wrong, if we up the retirement funds now and worst case hits, with the new law changes we could access our 401ks penalty free for the cash, but if we never need it soon then that money obviously adds to retirement.

Sorry for the ramble. Thoughts on if we should max out this year 401ks, even mine, if that means saving less $$$ in the bank?

Do not raid your retirement funds unless somebody has a gun to your head, or you're going to be homeless if you don't. That shouldn't even be in your thought process. The first step if things go south is to reduce your expenses, and a huge part of that is the Jeep. You can sell it now and use that cash savings to pad your emergency fund and give yourself a feeling of security, or you can wait and sell it down the line if you get to some form of hardship. But keep in mind that reducing expenses now will make it less likely that you end up in a place of hardship later. You only need enough cash on hand to cover your expenses for awhile. The lower your expenses are, the less cash you need.

[jehovasfitness23]

However, worst case scenario as I see it, and I may be wrong, if we up the retirement funds now and worst case hits, with the new law changes we could access our 401ks penalty free for the cash, but if we never need it soon then that money obviously adds to retirement.

Sorry for the ramble. Thoughts on if we should max out this year 401ks, even mine, if that means saving less $$$ in the bank?

Do not raid your retirement funds unless somebody has a gun to your head, or you're going to be homeless if you don't. That shouldn't even be in your thought process. The first step if things go south is to reduce your expenses, and a huge part of that is the Jeep. You can sell it now and use that cash savings to pad your emergency fund and give yourself a feeling of security, or you can wait and sell it down the line if you get to some form of hardship. But keep in mind that reducing expenses now will make it less likely that you end up in a place of hardship later. You only need enough cash on hand to cover your expenses for awhile. The lower your expenses are, the less cash you need.

Yes, I should have added that part that the jeep would be sold before dipping into retirement accounts.

[Dicey]

First time poster, looking for some general advice. Thus putting it here rather than the investing forum.
Married couple 39 and 35, no kids. Not looking to retire before age 55-60.

Well, I warned you about the facepunches. It's a source mild amusement that you're looking for advice on a website you clearly haven't done much research on. You don't want to retire particularly early, you drive an expensive clown car that isn't even paid for, and you don't want investment advice. Hmmm... Here are more things that don't add up:

"Expenses are generally $6500/mo which $1k of that is the car note. $2100 mortgage + property taxes." Okay, that's $78,000 a year.
+
"Emergency fund: 1 year worth of cash, enough to pay off car but only have about $7k left or roughly 3 months EF."
Car payoff and three months of current spending would $47,500.
How does $7k equal three month's EF?

"Gross income $175k/yr combined"
+
"Retirement accounts 401k + HSA = $165k"
How do a couple of DINKS well into their thirties who earn $175k/year only have $165K in retirement accounts?

Yeah, a lot of really smart people, like @lhamo, help people with their case studies and there have been a number of stunning success stories, but you just don't seem particularly committed or forthright. And I'm just asking questions, not throwing facepunches. 

[jehovasfitness23]

First time poster, looking for some general advice. Thus putting it here rather than the investing forum.
Married couple 39 and 35, no kids. Not looking to retire before age 55-60.

Well, I warned you about the facepunches. It's a source mild amusement that you're looking for advice on a website you clearly haven't done much research on. You don't want to retire particularly early, you drive an expensive clown car that isn't even paid for, and you don't want investment advice. Hmmm... Here are more things that don't add up:

"Expenses are generally $6500/mo which $1k of that is the car note. $2100 mortgage + property taxes." Okay, that's $78,000 a year.
+
"Emergency fund: 1 year worth of cash, enough to pay off car but only have about $7k left or roughly 3 months EF."
Car payoff and three months of current spending would $47,500.
How does $7k equal three month's EF?

"Gross income $175k/yr combined"
+
"Retirement accounts 401k + HSA = $165k"
How do a couple of DINKS well into their thirties who earn $175k/year only have $165K in retirement accounts?

Yeah, a lot of really smart people, like @lhamo, help people with their case studies and there have been a number of stunning success stories, but you just don't seem particularly committed or forthright. And I'm just asking questions, not throwing facepunches. 

Since I'm not good at replying within quotes.

1. Since my job is near bullet proof I dont' factor that into EF, just wife losing hers
2. Clown car? I'll have you know I load 3 large mastiffs in it... oh wait, I see now :p
3. We paid off about $120k in student loans over the past 10 yrs, along with doubling our incomes within the past 10 yrs... we've been at this income level for the past 3 yrs minus COLA increases
4. Why do you assume I'm not being forthright or committed? I"m just asking a specific question for us, I realize my goals different than others.

thanks for your time

[Laura33]

I've been in a similar situation (except neither job was stable).  And I can tell you from experience:  the thing that makes you stop sweating and lying awake at night isn't having more money in cash vs. more money in your 401(k).  It's having expenses that are low enough to get by with the lower salary indefinitely.

Thanks for explaining the math; I had the same question.  So basically, you have about a $25-30K/yr delta between your regular expenses and your wife's take-home pay, correct?  And about $35K in an emergency fund? 

First, that's good news.  What that means is that even if your wife loses her job, she doesn't need to find another high-paying job right away.  You guys can afford for her to undertake an extensive search to see if there is something nearby (the bad news is since you work for the city, I'm assuming you're not mobile, which is going to seriously affect the range of jobs available to her).  And even assuming she can't find a comparable job, all she needs to do is find something making $30K or so to cover your bills.  So there's no reason whatsoever to panic.  Personally, I agree that the best thing you can do right now is max out all tax-advantaged accounts available to you, while you have good income. 

Second, if you want to take action to increase your security, the best thing you can do is to comb through your expenses in detail and figure out which ones you can cut without feeling totally deprived.  This is where a case study comes in handy; people tend to have a lot of great ideas for things like cheaper cellphones, lowering grocery bills, and the like.  The other thing is that when you're paying that kind of attention, you can't ignore areas where your expenses are way higher than the value you're getting out of them.  It just smacks you in the face when you're looking at them; I bet you'll even go to your CC receipts and stuff to see where the heck all that money went.  So put a little time into that now -- call it your shit-hits-the-fan plan, or whatever else you want to -- to see as an experiment how long you can stretch out that emergency fund.  You can even put the potential cuts in order of priority, from stuff you can start on right now without hurting your quality of life (shop around for insurance, change cellphone plans) to things you will do only if the absolute worst happens (sell the house). 

The benefit to this is two-fold.  First, to the extent you can find areas to cut back, you can reduce your expenses and increase your savings starting now, which will put you in a stronger position should the shit come flying at you.  But more importantly, it gives you back control of your own life.  The most stressful part of waiting for the ax to fall is that the whole thing is out of your control; you have no idea if or when, and you have no way to affect the decision, even though that decision is key to your current plans for your life.  But if you have gone through your financial stuff and made your oh-shit plan, rather than sitting around worrying what's going to happen if your wife loses her job, you KNOW what's going to happen.  Because you have a plan!  And you know that plan is a good one and will allow you to continue to live a good, happy life for as long as you need.  Having power to control your own life is the best stress-reliever there is.*

*Ask me how I know.  And yes, the shit did come flying, and we did make it through.

[jehovasfitness23]

I've been in a similar situation (except neither job was stable).  And I can tell you from experience:  the thing that makes you stop sweating and lying awake at night isn't having more money in cash vs. more money in your 401(k).  It's having expenses that are low enough to get by with the lower salary indefinitely.

Thanks for explaining the math; I had the same question.  So basically, you have about a $25-30K/yr delta between your regular expenses and your wife's take-home pay, correct?  And about $35K in an emergency fund? 

First, that's good news.  What that means is that even if your wife loses her job, she doesn't need to find another high-paying job right away.  You guys can afford for her to undertake an extensive search to see if there is something nearby (the bad news is since you work for the city, I'm assuming you're not mobile, which is going to seriously affect the range of jobs available to her).  And even assuming she can't find a comparable job, all she needs to do is find something making $30K or so to cover your bills.  So there's no reason whatsoever to panic.  Personally, I agree that the best thing you can do right now is max out all tax-advantaged accounts available to you, while you have good income. 

Second, if you want to take action to increase your security, the best thing you can do is to comb through your expenses in detail and figure out which ones you can cut without feeling totally deprived.  This is where a case study comes in handy; people tend to have a lot of great ideas for things like cheaper cellphones, lowering grocery bills, and the like.  The other thing is that when you're paying that kind of attention, you can't ignore areas where your expenses are way higher than the value you're getting out of them.  It just smacks you in the face when you're looking at them; I bet you'll even go to your CC receipts and stuff to see where the heck all that money went.  So put a little time into that now -- call it your shit-hits-the-fan plan, or whatever else you want to -- to see as an experiment how long you can stretch out that emergency fund.  You can even put the potential cuts in order of priority, from stuff you can start on right now without hurting your quality of life (shop around for insurance, change cellphone plans) to things you will do only if the absolute worst happens (sell the house). 

The benefit to this is two-fold.  First, to the extent you can find areas to cut back, you can reduce your expenses and increase your savings starting now, which will put you in a stronger position should the shit come flying at you.  But more importantly, it gives you back control of your own life.  The most stressful part of waiting for the ax to fall is that the whole thing is out of your control; you have no idea if or when, and you have no way to affect the decision, even though that decision is key to your current plans for your life.  But if you have gone through your financial stuff and made your oh-shit plan, rather than sitting around worrying what's going to happen if your wife loses her job, you KNOW what's going to happen.  Because you have a plan!  And you know that plan is a good one and will allow you to continue to live a good, happy life for as long as you need.  Having power to control your own life is the best stress-reliever there is.*

*Ask me how I know.  And yes, the shit did come flying, and we did make it through.

Thanks. I'd like to say there's not much we can cut, but I know there is.

Recently we ditched cable for internet only and got YouTube TV, but that for some reason required me to upgrade internet speed, though I'm still coming out about $50 < when we had cable.

Just this week I cut our HBO subscription via Amazon, that's peanuts I know but still.

We have lawn care company come out 2x month to cut grass ($180/mo) as we have 2.5 acres.
I've thought about ditching them and spending about $1k on a lawnmower but at this point I really don't want to go there.

I think our food budget could be cut by 40% if we were smarter about it, but I admit we go for convenience over cheapness. Think individual oatmeal packs vs large canister and so on.
Groceries we spend about $750/mo but that does include everything else at grocery store (TP, feminine products, dish/laundry detergent, cleaning supplies etc)

Our dogs cost about $300/mo thru the year, and that's not an item we can cut back on unless we eat a dog.

Gas we spend about $250/mo (well before all this, currently we're at $30 for 2 months LOL). This amount is largely b/c of where we live but also b/c the wife's work commute is 2.5 hrs/day total and lots of stop and go traffic. I'm really hoping her work allows her to work from home more after all this as she's been doing for the past 5 weeks or so. Before all this she worked from home 1x wk and her boss was hesitant to go for 2x wk.

Our utilities we can't cut anymore but currently paying $150/mo so I think we're solid there.

Cellphones currently cost $140/mo.

We usually budget $160/mo between us both for "fun" money, which usually ends up going toward buying lunches out when at work, that's been cut now since we both work from home for the time being.

Car maintenance repairs on avg are $100/mo.

I think where we end up spending more than we budget for are random things. For example. This month we spent $120 on 2 bidet attachments, clearly one time purchases, but seems like every month there's stuff like that that pops up.

Restaurant/beer fund is $100/mo combined and we usually stick to that.
 
Clothing budget is $50/mo again pretty good sticking to that.

Home maintenance/repairs is about $200/mo.

[kpd905]

Groceries should be very easy to cut by probably 30-40%.  And cell phone plan could easily be cut by 50% by switching to a MNVO plan, while keeping the same service.

[Laura33]

So two more thoughts:

1.  Since you are saving so much now, make a point of putting that toward something useful.  And by "saving" I mean money AND time.  The money you save can go toward your savings or 401(k); the time you and your DW are saving on your commutes can go toward, say, buying that big container of oatmeal and practicing new ideas like overnight oats or other things that you can incorporate into your schedule moving forwards.  I completely understand convenience foods; it's one of my weaknesses as well.  But you need the conenience when you're super busy with your regular life; you don't need it when those external pressures go away.  What really happens is that the convenience becomes a habit, so you continue on with that habit without thinking of it, even after the original need goes away.*  This is a great opportunity to test how much of that you actually enjoy/need and how much is just unthinking habit.

2.  It's the miscellaneous category that will kill you.  As you have noted:  this month, it's bidet stuff; next month, it may be new paint for the bedroom, or a weed whacker because the old one broke, or an unexpected medical bill because you took a fall and ended up in the ER, or you went to Target and walked out with $200 of stuff that you can't even remember.**  To quote Roseanne Rosannadanna:  it's always something.  This is the number one reason why you track your spending:  so you can plan for those unexpected-but-always-happen extras. 

True story:  when we bought our house, we knew it needed some work, but that was ok, because it was quite a bit less than we could afford.  We let our kitchen remodel turn into a whole-back-half-of-the-house remodel, partly for logistical reasons (can't remodel a kitchen and then come back 5 years later and install a new bathroom above the work you just did), and partly because of while-we're-at-it syndrome.  But we told ourselves it was ok, because at least we were getting everything done at once, and then we wouldn't need to touch it again for 15 years.  Except then the nice, new, big kitchen windows showed how totally horrible the deck was, so we had to rebuild that (turns out it wasn't even attached to the house!).  And then the AC we had installed burned out -- second HVAC guy said first HVAC guy had undersized it -- so we had to buy a whole new unit.  And then I got tired of parking in the rain/snow/blazing sun (living in too many other homes with attached garages had spoiled me), so we built a garage.  And then, well, my family's from KY/IN, so every garage requires a basketball hoop -- except I left that to my engineer DH to take care of, and he installed a $2000+ permanent in-ground hoop.  Etc. etc. etc.

Side note:  I am really wicked smart and financially savvy, and yet I still fell for the self-delusion that "once I get this done, this'll be it for years."  Like I said, it's always something.  Even if you get to the point where you have everything you need and reasonably want now, your brain will come up with other things you "need" next week or month or year.  But you know what the real secret is?  Most of that stuff you actually don't need; you're just buying it because you're used to buying what you want, when you want it.  The key to getting ahead is being intentional about what you spend.  Really, sitting here today, if your DW lost her job, would you still be happy you bought the bidet attachments?  If it's a year from now and your EF is on its last legs, would you be happy then?  You need to have a plan that trains your brain to hit the pause button on those "seemed like a good idea at the time" purchases that in reality are lower-priority than other needs.  So track your spending.  Use that data to develop and continually refine your budget.  Yes, you're not going to buy bidet attachments every month -- but I betcha you spend money on something for the house every month, right?  Or at least every couple of months?  We have a category called "home items" that is specifically for stuff like that.  It's only when you really keep track of all of those kinds of irregular expenses that you have a true picture of your finances -- and you need that in order to evaluate whether you're really spending your money where it matters most.   


*One way to combat this tendency is to spend a little time reading up on stoicism.  It's not just about depriving yourself of stuff to prove you can do it.  What I find the most helpful is the reminder that I am capable of managing much more than I think, and that I don't actually need all of those nice conveniences and "things" to live a happy and fulfilling life.  It also helps with hedonic adaptation.  My life is now filled with luxury -- often well beyond what I ever dreamed of as a kid.  And yet it feels pretty blah and ordinary.  But training myself to see everything around me as luxury -- as so much beyond what I actually need to be happy -- helps me retain my gratitude and appreciation for all that everyday stuff.

**Not that I resemble that in any way whatsoever. . . .

[dresden]

I was in a similar situation 15 years ago but the way I looked at it is that if I was paying around 30% taxes I would be better off getting that savings and then if I really needed the money I could pull out at 0% tax and a 10% penalty to supplement my post-tax money.  So as long as you have post-tax money there is no reason not to max out your 401k.

Also, if you have one year savings that will get you by for many years- so you are in great shape.

[erutio]

After contributing up to the match in your 401ks, you generally want to start maxing out the 457 before the 401k, as you can withdraw from a 457 anytime after job separation, penalty-free. 

[jehovasfitness23]

After contributing up to the match in your 401ks, you generally want to start maxing out the 457 before the 401k, as you can withdraw from a 457 anytime after job separation, penalty-free.

I did not know that thanks. I knew you could withdraw while employed, but if you lost your job you had to pay it back within a short time window.

[Dicey]

After contributing up to the match in your 401ks, you generally want to start maxing out the 457 before the 401k, as you can withdraw from a 457 anytime after job separation, penalty-free.

I did not know that thanks. I knew you could withdraw while employed, but if you lost your job you had to pay it back within a short time window.

I've never been eligible for a 457, so feel free to correct me if I'm wrong, but I think you mistook an apple for an orange. It sounds like what you're describing is a 401k loan and it's pitfalls, not the post-separation advantages of a 457 that @erutio is citing.