Family Finances - Are we doing something wrong?

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Family Finances - Are we doing something wrong?

Postby dpusa » Mon Apr 29, 2013 10:07 am

Experts

So, I wanted to give a snapshot of our finances and situation and see if we are doing anything wrong and what we are doing right. As a couple we both have professional jobs but still feel like we are living paycheck to paycheck despite having decent income. Let me know if you need more information.

Family: Two parents (mid 30s) & Two young kids (5 and 2) both in private day care

Combined Income: GROSS $315k

Assets:
Home (Just moved there): $140k equity with $500k outstanding mortgage (Mortgage of $3.4k per month inc taxes/hazrd)
Rental Home: $175k equity with $245k outstanding mortgage (Currently the rent pays for the mortgage, taxes, hazard and leaves $200 per month for a maintenance fund)
Combined 401ks: $371k
Combined nondeductible IRAs: $50k
Brokerage Account: $58k
Emergency Fund: $62k
529 Plan: $18k

Ongoing Savings:
401k: Combined contribution of $35k
IRA: Combined contribution of $10k
529: Combined contribution for both kids: $7k
Estimated Yearly Mortgage Overpayment: $30k
Brokerage Account: Yearly contribution of $24k

Major Monthly Costs:
Daycare: $2k for both kids albeit it will decrease when older child starts first grade later this year
Car/Rental Home Insurance: $150 per month
Term Life Insurance: $100 per month
New Car Fund: Saving $500 per month for a new car in a few years
Maintenance Fund: Saving $100 per month for general home repairs etc.
Other Costs: We have no other debt except for our primary home and rental home mortgages.

Thank you all so much
Ursula
Last edited by dpusa on Mon Apr 29, 2013 10:21 am, edited 1 time in total.
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Re: Family Finances - Are we doing something wrong?

Postby livesoft » Mon Apr 29, 2013 10:12 am

You may wish to read the "taxes on family with $200,000" income thread for some ideas: viewtopic.php?t=79510
Your income is higher, so your taxes will be higher.

If you are paying $24,000 a year for daycare, can you get nanny for $14,000 a year?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Family Finances - Are we doing something wrong?

Postby damjam » Mon Apr 29, 2013 10:14 am

Others will chime in, but one thing stands out for me.
dpusa wrote:Combined nondeductible IRAs: $50k

Have you considered creating a Backdoor Roth IRA?
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Re: Family Finances - Are we doing something wrong?

Postby hand » Mon Apr 29, 2013 10:15 am

Two pieces missing from this puzzle:
1) What are your annual expenses beyond the $100k in savings you identified
2) What debt do you have other than the mortgage (credit cards, car loans etc.)
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Re: Family Finances - Are we doing something wrong?

Postby livesoft » Mon Apr 29, 2013 10:20 am

If your mortgage interest rate is reasonable, I would stop paying extra on the mortgage if you want to spend more money on eating out, cars, vacations, and things like that.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Family Finances - Are we doing something wrong?

Postby dpusa » Mon Apr 29, 2013 10:22 am

hand wrote:Two pieces missing from this puzzle:
1) What are your annual expenses beyond the $100k in savings you identified
2) What debt do you have other than the mortgage (credit cards, car loans etc.)


I have updated my first thread - thank you for the insight.
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Re: Family Finances - Are we doing something wrong?

Postby dpusa » Mon Apr 29, 2013 10:23 am

livesoft wrote:If your mortgage interest rate is reasonable, I would stop paying extra on the mortgage if you want to spend more money on eating out, cars, vacations, and things like that.


Mortgage rate is 3.5% on a 30 year fixed. I agree... less overpayments would be good; but trying to balance that with being debt free asap. I know - oxymoron!
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Re: Family Finances - Are we doing something wrong?

Postby mhc » Mon Apr 29, 2013 10:28 am

Whenever a person saves a lot, you will be living pay check to pay check to some degree because the extra money is going to savings. The key is to find the right balance between saving for the future and enjoying life today. That is a spot you have to find. You are saving about 1/3 of your income. If you want to retire early or very wealthy, then keep it up. Otherwise, you may not need to save so much.
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Re: Family Finances - Are we doing something wrong?

Postby momar » Mon Apr 29, 2013 10:33 am

I don't think you understand what "living paycheck to paycheck" means.
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Re: Family Finances - Are we doing something wrong?

Postby dpusa » Mon Apr 29, 2013 10:38 am

momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.
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Re: Family Finances - Are we doing something wrong?

Postby investingdad » Mon Apr 29, 2013 10:57 am

Our situations are not terribly different. The three main differences are that we have only a primary home, our income is about 100K less per year, and our motgage debit is only 235K. We're just a few years older than you and our two kids are just a little older. Our Net was around yours at your age (800K and change if I read your post correctly).

Our mortgage debt is about 1.1x our Gross. Yours is 2.3x your gross. That would make me uncomfortable. Is it wrong? I don't know. Your collecting income on the one home equal to the cost so that's a big plus. But...yeah, I wouldn't be quite as comfortable with that much debt relative to our gross income.

Otherwise no comments.
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Re: Family Finances - Are we doing something wrong?

Postby Default User BR » Mon Apr 29, 2013 11:24 am

With that kind of income, why are you wasting time with a break-even rental property? Sell that, apply the equity to the other mortgage that you're concerned about (I personally wouldn't be, but that's up to you).


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Re: Family Finances - Are we doing something wrong?

Postby Grt2bOutdoors » Mon Apr 29, 2013 11:28 am

In short: no, other than you have a higher housing cost than I'd be comfortable with but that isn't necessarily bad if the housing costs in the geographical location you reside demands that - places I can think of off the bat - San Francisco or the Northeast.

My rough analysis: you sit squarely in the 33% federal tax bracket, you likely pay state income tax if you live on the coasts other than Washington State or Florida. You may be in AMT depending on if you live in a high tax state (property and/or income tax). Given your deductions including 401k, I figure you take home about 57-58% of your gross. You save (10+30+24+7+6) or 77k in after-tax dollars, you spend another 41K on PITI - that's about 65% of gross. Another 24K on daycare - now we're at 78% of net. Now, you haven't listed it - but the rest is spent on utilities, gas for car, clothing, children's needs, beauty care (haircuts,etc), phone, heating cost, etc.). Believe it or not, you're doing fine, to really squeeze your budget may make your lives miserable.

You can think of your budget like this - saving 42% of net (not including 401k + any match). :sharebeer
Does not include your tax-deferred home equity earned (part of mortgage paid is equity) + the $200 net cash flow after expenses.
Living on 20%.
Remainder is necessary, unavoidable expenditures which unfortunately include a heavy tax burden.
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Re: Family Finances - Are we doing something wrong?

Postby yosef » Mon Apr 29, 2013 11:32 am

mhc wrote:Whenever a person saves a lot, you will be living pay check to pay check to some degree because the extra money is going to savings. The key is to find the right balance between saving for the future and enjoying life today. That is a spot you have to find. You are saving about 1/3 of your income. If you want to retire early or very wealthy, then keep it up. Otherwise, you may not need to save so much.


My thoughts exactly. You feel like you're living check to check because you are saving like crazy. Which is generally good. What you don't mention is why this bothers you. Is there something you'd like to do or buy that you feel like you can't? If so, you may want to ease up on the savings.
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Re: Family Finances - Are we doing something wrong?

Postby linguini » Mon Apr 29, 2013 11:44 am

You're "breaking even" in the sense that after maxing out your retirement accounts, maxing out college education funds, paying for private daycare, massively overpaying your mortgage, paying a second mortgage on your rental property, paying your taxes, contributing to a new car fund, and contributing to a maintenance fund, you only have a little over half of a median American family's gross income to put in your taxable brokerage account every year. If you feel as if you need more money to spend on something, that money is already there for you to take if you just loosen up on the savings, stop overpaying your mortgage payments by so much, or sell the rental property. Your problems are not financial; they're mental. You need to accept that as long as you are intent on living the lifestyle of a wealthy person, you have to stop stressing out about whether or not you can afford to pay off two mortgages 10 years early, or no matter how much you save you will never feel you have enough.
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Re: Family Finances - Are we doing something wrong?

Postby dpusa » Mon Apr 29, 2013 12:17 pm

All

Thanks very much for the counsel. I agree we save a lot/overpay the mortgage - I guess we are trying to be as financially responsible as possible, but do need to balance that. Mainly I wanted to see that we were not saving too little, or in the wrong places. The rental home I agree is not ideal; but it was a former home that we ended up as 'accidental' landlords but we would consider selling when the time is right.
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Re: Family Finances - Are we doing something wrong?

Postby hand » Mon Apr 29, 2013 12:43 pm

dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


There's nothing obvious here to indicate the financial distress typically related to "living paycheck to paycheck".
In fact from most objective standpoints, you appear to be in pretty good shape (OK assets, great savings amount if you can continue it, reasonable lifestyle from what has been disclosed). Should you encounter a financial issue (job loss, unexpected expense) you would be be able to easily absorb the expense with your emergency fund or by reducing your savings.

One possibility is that you have demanding professional careers and either by "necessity" or by inattention have fallen into the trap of high monthly expenses (household staff, frequent expensive meals out, expensive clothes and hobbies etc.) that are making you are uncomfortable because your spend is higher than you think reasonable.

An alternate possibility is that your discomfort is more about control of spend rather than amount of spend. Do you have a budget? Is your spouse on the same page with you regarding spending & savings?

The third possibility is that you are simply setting your savings commitment too high and leaving little margin for error given your variable monthly expenses. Reduce your savings target by $5-$10k for a year and do your best not to increase your costs, and the extra $500 -$1000 / month should make things feel a bit more comfortable.

If it makes you feel any better, I am in a very similar situation from an income, savings and spending perspective (even have a dumpy rental spitting off a couple hundred a month) and things still feel tight on a monthly basis. Even though I'm not living a minimalist existence, I attribute the feeling more to aggressive saving than to overspending. Deal that I've made with spouse is that once we hit $1M in retirement savings we'll relax the spending a bit (though my secret hope is that salary inflation will fund any lifestyle inflation without requiring a cut in savings).
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Re: Family Finances - Are we doing something wrong?

Postby bourg » Mon Apr 29, 2013 12:55 pm

Save first, spend the rest is my motto. I don't feel guilty if I've hit all my monthly savings goals (retirement, college, emergency, general savings, etc) and I spend every penny leftover. Seems like its more of a mindset issue than a savings issue for you guys.
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Re: Family Finances - Are we doing something wrong?

Postby scone » Mon Apr 29, 2013 1:08 pm

If it were me, I'd sell the rental, and refinance the primary residence, adding in the rental equity. That will get you to zero debt more quickly, and with a lower monthly payment, should alleviate the 'living paycheck to paycheck' feeling.
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Re: Family Finances - Are we doing something wrong?

Postby bungalow10 » Mon Apr 29, 2013 1:16 pm

dpusa wrote:
Ongoing Savings:
401k: Combined contribution of $35k - half that - $17.5k
IRA: Combined contribution of $10k - same
529: Combined contribution for both kids: $7k - $9k
Estimated Yearly Mortgage Overpayment: $30k - zero
Brokerage Account: Yearly contribution of $24k - $12k

Major Monthly Costs:
Daycare: $2k for both kids albeit it will decrease when older child starts first grade later this year - same
Car/Rental Home Insurance: $150 per month - ours is slightly higher
Term Life Insurance: $100 per month - same
New Car Fund: Saving $500 per month for a new car in a few years - zero
Maintenance Fund: Saving $100 per month for general home repairs etc. - same
Other Costs: We have no other debt except for our primary home and rental home mortgages. - same



We make $100k less than you and have many of the same expenses, although a MUCH cheaper house (owe 130k on a 15 year at 2.3% - $880/month PI payment). I noted our amounts above.

We put 27k less in savings and don't over pay our mortgage by 30k. We are pretty much paycheck-to-paycheck as well. We also have a rental (quad), and that is figured into our income - the payment is about $1700 and it generates enough extra each month to pay the PI payment on our residence ($880).
Last edited by bungalow10 on Mon Apr 29, 2013 1:59 pm, edited 1 time in total.
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Re: Family Finances - Are we doing something wrong?

Postby EmergDoc » Mon Apr 29, 2013 1:30 pm

dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


I guess I live paycheck to paycheck too. Of course, I could quit funding my retirement accounts and other savings goals and then put all the extra into $1 bills and use it to fill a big tank in the living room to swim in a la Scrooge McDuck.

The phrase "paycheck to paycheck" generally means you're not saving any money...at all. :)

If you feel like you'd be happier spending more money, then spend more money. You're young and doing great net worth wise. Like many of us Bogleheads, it appears to be harder for you to spend money than to save it. It's a great problem to have, since it is pretty readily fixed.

Look at what you wrote:

401k: Combined contribution of $35k
IRA: Combined contribution of $10k
529: Combined contribution for both kids: $7k
Estimated Yearly Mortgage Overpayment: $30k
Brokerage Account: Yearly contribution of $24k
New Car Fund: $6K/year

They're all great things to do with your extra money, but you're at least $112K from living paycheck to paycheck (maybe a little less given the tax savings on retirement contributions.) That's 36% of your income. You could probably cut that to 25% and still be fine. That would free up nearly $3K a month to blow on whatever you want.
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Re: Family Finances - Are we doing something wrong?

Postby NightOwl » Mon Apr 29, 2013 1:44 pm

Grt2bOutdoors wrote:In short: no, other than you have a higher housing cost than I'd be comfortable with but that isn't necessarily bad if the housing costs in the geographical location you reside demands that - places I can think of off the bat - San Francisco or the Northeast.

My rough analysis: you sit squarely in the 33% federal tax bracket, you likely pay state income tax if you live on the coasts other than Washington State or Florida. You may be in AMT depending on if you live in a high tax state (property and/or income tax). Given your deductions including 401k, I figure you take home about 57-58% of your gross. You save (10+30+24+7+6) or 77k in after-tax dollars, you spend another 41K on PITI - that's about 65% of gross. Another 24K on daycare - now we're at 78% of net. Now, you haven't listed it - but the rest is spent on utilities, gas for car, clothing, children's needs, beauty care (haircuts,etc), phone, heating cost, etc.). Believe it or not, you're doing fine, to really squeeze your budget may make your lives miserable.

You can think of your budget like this - saving 42% of net (not including 401k + any match). :sharebeer
Does not include your tax-deferred home equity earned (part of mortgage paid is equity) + the $200 net cash flow after expenses.
Living on 20%.
Remainder is necessary, unavoidable expenditures which unfortunately include a heavy tax burden.


I think that this is a great post that summarizes the situation well. For exactly these reasons, I calculate my savings as a percentage of net, not gross -- it's what you do with the money that actually gets to you that matters.

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Re: Family Finances - Are we doing something wrong?

Postby feh » Mon Apr 29, 2013 1:46 pm

scone wrote:If it were me, I'd sell the rental


If it were me, I'd sell the rental and the primary residence and downsize.

Assuming you don't live in an extremely HCOL area, why do you have a $650K house?

Get your spending under control. You're in position to retire early, if you choose to take the right path.
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Re: Family Finances - Are we doing something wrong?

Postby btenny » Mon Apr 29, 2013 1:50 pm

1. I would keep the rental as long as one of you has the time to track your tenet and do proper upkeep on it. Make sure you keep expenses for that property separate from you home. The big issue I see with the rental home is appreciation. Has it appreciated a lot while you were using it as a home? If so you will lose the capital gains exclusion for homes after two years of renting it. If not then keep renting the property and after a while you will have a great cash flow asset..

2. You need a bigger maintenance fund for your homes. I think you need to have $3K-4K set aside for repairs and big ticket items like heaters or ??? that might die or need repaired..

3. Make sure you have a good house keeper and yard guys for your homes to reduce your work load and give you time to enjoy life and still have fun with your kids. Include the yard expense for your rental in the rent. This makes sure the rental does not degrade over time. At your income levels and responsibility levels this is a must. It makes marrages better as well. These things make a home nice.

4. I would put that $30K you are overpaying your mortgage with into your taxable brokerage fund for the next few years so you have say $200K or more as a bigger emergency/good times fund. Then maybe at that time I would start over paying the mortgage again. Remember you need tax breaks and that loan is 2% or so money so investing at 5% makes you more money.

Overall I think you are doing great. Keep up the plan and maybe you can slow down a little when the kids get into their teens or after college.

Bill
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Re: Family Finances - Are we doing something wrong?

Postby letsgobobby » Mon Apr 29, 2013 1:50 pm

dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


so if this is really true, then you have a major budget leak somewhere and need to find out what it is.

I suspect you spend a lot more than you think you spend, and don't know it. A gross of $315k probably has federal taxes of roughly $60k. I didn't see what state you live in. You have described saving of $126k. That means you are spending: $315 - $60 - $126 = $130k per year. If that is true, then that is why you live paycheck to paycheck. If you don't want to live paycheck to paycheck, then spend less than that.

You know it's not really paycheck to paycheck, right? It's just an artifice you've created by having a 'zero budget.' That's not a bad thing. By creating an artificial sense of poverty you maintain the drive to keep saving, stay (relatively) frugal, and avoid lifestyle creep.
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Re: Family Finances - Are we doing something wrong?

Postby dpusa » Mon Apr 29, 2013 2:01 pm

hand wrote:
dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


There's nothing obvious here to indicate the financial distress typically related to "living paycheck to paycheck".
In fact from most objective standpoints, you appear to be in pretty good shape (OK assets, great savings amount if you can continue it, reasonable lifestyle from what has been disclosed). Should you encounter a financial issue (job loss, unexpected expense) you would be be able to easily absorb the expense with your emergency fund or by reducing your savings.

One possibility is that you have demanding professional careers and either by "necessity" or by inattention have fallen into the trap of high monthly expenses (household staff, frequent expensive meals out, expensive clothes and hobbies etc.) that are making you are uncomfortable because your spend is higher than you think reasonable.

An alternate possibility is that your discomfort is more about control of spend rather than amount of spend. Do you have a budget? Is your spouse on the same page with you regarding spending & savings?

The third possibility is that you are simply setting your savings commitment too high and leaving little margin for error given your variable monthly expenses. Reduce your savings target by $5-$10k for a year and do your best not to increase your costs, and the extra $500 -$1000 / month should make things feel a bit more comfortable.

If it makes you feel any better, I am in a very similar situation from an income, savings and spending perspective (even have a dumpy rental spitting off a couple hundred a month) and things still feel tight on a monthly basis. Even though I'm not living a minimalist existence, I attribute the feeling more to aggressive saving than to overspending. Deal that I've made with spouse is that once we hit $1M in retirement savings we'll relax the spending a bit (though my secret hope is that salary inflation will fund any lifestyle inflation without requiring a cut in savings).



I think you and the other folks just hit the nail... its a mindset issue!
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Re: Family Finances - Are we doing something wrong?

Postby Grt2bOutdoors » Mon Apr 29, 2013 2:05 pm

letsgobobby wrote:
dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


so if this is really true, then you have a major budget leak somewhere and need to find out what it is.

I suspect you spend a lot more than you think you spend, and don't know it. A gross of $315k probably has federal taxes of roughly $60k. I didn't see what state you live in. You have described saving of $126k. That means you are spending: $315 - $60 - $126 = $130k per year. If that is true, then that is why you live paycheck to paycheck. If you don't want to live paycheck to paycheck, then spend less than that.



They are not spending $130K per year. They are spending $315-35K (401K) -65K (Fed Tax)-AMT-state tax-41K (PITI)-77K (savings) - 24K (daycare) = all else. I figure, net spend after what was disclosed amounts to roughly $40K a year. I've done enough tax returns to figure they are in AMT given income and 4 exemptions, plus high likelihood of high tax state.
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Re: Family Finances - Are we doing something wrong?

Postby Boglenaut » Mon Apr 29, 2013 2:22 pm

dpusa wrote:Experts


Keep in mind there are really only a few bone fide "experts" here... most of us are hobbyists or enthusiasts or just regular folks with an interest. However, collectively, I think we seem to get it right.


As someone once posted, you are getting advice from strangers on the internet. ;)
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Re: Family Finances - Are we doing something wrong?

Postby letsgobobby » Mon Apr 29, 2013 2:29 pm

Grt2bOutdoors wrote:
letsgobobby wrote:
dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


so if this is really true, then you have a major budget leak somewhere and need to find out what it is.

I suspect you spend a lot more than you think you spend, and don't know it. A gross of $315k probably has federal taxes of roughly $60k. I didn't see what state you live in. You have described saving of $126k. That means you are spending: $315 - $60 - $126 = $130k per year. If that is true, then that is why you live paycheck to paycheck. If you don't want to live paycheck to paycheck, then spend less than that.



They are not spending $130K per year. They are spending $315-35K (401K) -65K (Fed Tax)-AMT-state tax-41K (PITI)-77K (savings) - 24K (daycare) = all else. I figure, net spend after what was disclosed amounts to roughly $40K a year. I've done enough tax returns to figure they are in AMT given income and 4 exemptions, plus high likelihood of high tax state.

Wouldn't surprise me if they live in a state like TX, with no state income tax. We don't pay state income tax. Many people don't pay state income tax. They didn't say they pay state income tax!

If they have a no state income tax state, their AMT probably isn't much. Our was under $2000.

I don't know in what world a mortgage PITI, daycare, etc., aren't considered spending. They're spending in my world. I write a check every month for them.

Larger point is this: their spending is about three times the gross household income in the United States. The paycheck to paycheck feeling is a contrivance. Not a bad one, I might add.

When they get to retirement they'll be in good shape. Probably an early retirement, if they want it.

If they don't like the feeling they have, they should find out where their budget leaks are and/or save less money.
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Re: Family Finances - Are we doing something wrong?

Postby greg24 » Mon Apr 29, 2013 3:02 pm

62k emergency fund. You are most definitely NOT living paycheck to paycheck.
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Re: Family Finances - Are we doing something wrong?

Postby btenny » Mon Apr 29, 2013 3:51 pm

And as I pointed out a $62K emergency fund with a $300K+ income is dramatically too small. With your expenses and liabilities you should have at least $200K is cash or stocks available to use and not have to borrow a penny or have to raid your retirement accounts. Things happen in life that are very unexpected that cost big $$$. Some good and some bad but if you do not have the cash, oh well... So you need to stop putting money into extra mortgage payments and put more money into your savings account now....

Also do both of you have enough life insurance and disability insurance? If not buy some now.

By the way. You are doing great. Stop worrying about the paycheck to paycheck thing. You are stressing the good way...
Relax a little and enjoy life and have fun...
Bill
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Re: Family Finances - Are we doing something wrong?

Postby letsgobobby » Mon Apr 29, 2013 4:07 pm

They have $120k bank plus brokerage on yearly spending of about the same.
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Re: Family Finances - Are we doing something wrong?

Postby MoneyOCD » Mon Apr 29, 2013 4:12 pm

Not sure if anyone already mentioned


dpusa wrote:Ongoing Savings:
401k: Combined contribution of $35k
IRA: Combined contribution of $10k <--- you can put there combined $11K in 2013
529: Combined contribution for both kids: $7k
Estimated Yearly Mortgage Overpayment: $30k
Brokerage Account: Yearly contribution of $24k

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Re: Family Finances - Are we doing something wrong?

Postby BolderBoy » Mon Apr 29, 2013 4:26 pm

dpusa wrote:
momar wrote:I don't think you understand what "living paycheck to paycheck" means.


Momar - I guess I mean we feel like we are always in a pinch. Which I agree is crazy given what we save... hopefully that makes sense! Not sure it does even in my head.


This is a self-imposed pinch and is GOOD by definition. Nisi has some good ideas.
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Re: Family Finances - Are we doing something wrong?

Postby sadie wess » Wed May 01, 2013 4:23 pm

Boglenaut wrote:
dpusa wrote:Experts


Keep in mind there are really only a few bone fide "experts" here... most of us are hobbyists or enthusiasts or just regular folks with an interest. However, collectively, I think we seem to get it right.


As someone once posted, you are getting advice from strangers on the internet. ;)


+1
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Re: Family Finances - Are we doing something wrong?

Postby Peter Foley » Wed May 01, 2013 4:55 pm

Since my daughters are age 30 and 28 it has been a few years since I have been in your situation. I do remember a couple of things quite clearly. When both kids were out of diapers it seemed like we got a raise! Again, we got a raise when both kids were finally in school, even though we went the private school route. In other words, time is going to resolve some of the pinch you are feeling. To make life a little easier, you might want to consider a little less after tax saving ($200/mo.?) until your oldest is in school for full days. I appears to me you are on the right track financially but could lighten up a little bit to enjoy life a little more today. When both kids are in school you will be able to save at your current levels (or higher to make up for lost ground) and not feel like you are living paycheck to paycheck.
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Re: Family Finances - Are we doing something wrong?

Postby enderland » Wed May 01, 2013 5:23 pm

Maintenance Fund: Saving $100 per month for general home repairs etc.


This seems really low to me.
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Re: Family Finances - Are we doing something wrong?

Postby High Stroller » Wed May 01, 2013 5:49 pm

With that kind of income, why are you wasting time with a break-even rental property? Sell that, apply the equity to the other mortgage that you're concerned about (I personally wouldn't be, but that's up to you).

+1

My wife and I are in a similar situation, both in general and with the rental home. Our rental "paid for itself," with rent covering mortgage, taxes, etc, for a few years. Then suddenly, it needed a new roof, broken sub zero fridge, water damage, one bad tenant who left the place needing minor repairs, and so on. It went from paying for itself to costing us an extra $20K+ in no time :shock:. We are putting it on the market at the end of this lease, and cannot wait to be done with that.

Regardless of what you want to do with the equity (home mortgage, 529, brokerage, etc), selling while you are still breaking even is something you may want to consider. I wish we had a few years ago.
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Re: Family Finances - Are we doing something wrong?

Postby Easy Rhino » Wed May 01, 2013 6:43 pm

It seem like you have money squirreled away in lots of places. In addition to other funds listed, you may have a "car fund" and a "home repair fund". This can also increase the hand-to-mouth feeling, along with what everyone else mentioned.

Some folks just say to heck with it and just let those funds slosh around in their checking account or in their emergency fund.
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Re: Family Finances - Are we doing something wrong?

Postby Confused » Wed May 01, 2013 11:33 pm

dpusa wrote:
despite having decent income.

Combined Income: GROSS $315k



I didn't know that $315k only qualified as "decent" these days. Sounds like "massive" to me.
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Re: Family Finances - Are we doing something wrong?

Postby Twins Fan » Thu May 02, 2013 4:54 pm

No kidding!! If I could reach through the screen and slap a person... :D

Seriously, OP... your ongoing SAVINGS breakdown between you and dear spouse is more than I gross in a year!! Not even including the $30K extra you throw at the mortgage plus all the other little stashes.

Are you doing something wrong? Yes,.... whining when you have no right to. :D

I am kidding here, but kind of not. I am impressed by and respect many of the members here that throw out big $$ numbers. Not all boglheads are in the same spot though. It can be quite offensive to those that actually do know what it's like to live check to check, when we see people making a "decent" $315K, feeling "pinched", living "check to check", and not being able to figure out how to make it work. Pfft, wish I had it so rough.
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Re: Family Finances - Are we doing something wrong?

Postby awval999 » Thu May 02, 2013 5:05 pm

I think the OP needs a forced intervention here where he/she is required to spend $10k on an extravagent vacation, gift, etc for the family. You are forgetting why you are are working in the first place.

If you think one more dollar squirreled away can prevent the risk of life--- and this is what it ALWAYS comes down to here, bogleheads thinking all these extra savings, in multiple, named, extra accounts, thinking that they can prevent life from occuring--- that they can save themselves from a long tail, the long tail risk---you are wrong.

Where is your child with cancer fund? Or spouse infidelity fund? Or terrible car accident fund? Or nuclear terrorism fund?

Terrible, terrible things can happen in life (lets hope they don't happen). Spend some money and enjoy your family. Make a lifetime memory with your family and those that you love. You are much, much likely to have a terrible death, divorce, life wrench thrown at you, than not being able to afford college, a new car, or to retire.

The worst things I see here, are never not enough savings, the fact that you are here, at this website is enough to show me that you will be able to retire, its the misers that "can't" retire because they don't have "enough". The misers that miss out on life to squirrel away another dollar and another memory not made with their family.

For you--- the prescription is less savings and more spending--- why are you doing this in the first place?
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Re: Family Finances - Are we doing something wrong?

Postby stoptothink » Thu May 02, 2013 5:12 pm

Confused wrote:
dpusa wrote:
despite having decent income.

Combined Income: GROSS $315k



I didn't know that $315k only qualified as "decent" these days. Sounds like "massive" to me.


Only 8x the average household income definitely qualifies as "decent". Man, I wish I was living paycheck=to-paycheck.
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Re: Family Finances - Are we doing something wrong?

Postby retirementandpf » Thu May 02, 2013 6:49 pm

awval999 wrote:I think the OP needs a forced intervention here where he/she is required to spend $10k on an extravagent vacation, gift, etc for the family. You are forgetting why you are are working in the first place.

If you think one more dollar squirreled away can prevent the risk of life--- and this is what it ALWAYS comes down to here, bogleheads thinking all these extra savings, in multiple, named, extra accounts, thinking that they can prevent life from occuring--- that they can save themselves from a long tail, the long tail risk---you are wrong.

Where is your child with cancer fund? Or spouse infidelity fund? Or terrible car accident fund? Or nuclear terrorism fund?

Terrible, terrible things can happen in life (lets hope they don't happen). Spend some money and enjoy your family. Make a lifetime memory with your family and those that you love. You are much, much likely to have a terrible death, divorce, life wrench thrown at you, than not being able to afford college, a new car, or to retire.

The worst things I see here, are never not enough savings, the fact that you are here, at this website is enough to show me that you will be able to retire, its the misers that "can't" retire because they don't have "enough". The misers that miss out on life to squirrel away another dollar and another memory not made with their family.

For you--- the prescription is less savings and more spending--- why are you doing this in the first place?


+1!!! I have been reading this forum for a few weeks now and what you wrote above is my general impression as well.
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Re: Family Finances - Are we doing something wrong?

Postby dpusa » Fri May 03, 2013 1:50 pm

All

Thank you for your advice again.

If I offended anyone with my choice of words or came across as whining when describing our income or the emotion we feel about our month to month spend, my humble apologies; not my intention AT ALL.
We never forget how fortunate we are, and are trying to instill that in our kids over time too. We grew up with huge financial constraints and all that brings, so never forget what it means to earn money, and why we earn it.

THanks again
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