Worried about the future/not saving enough

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CorradoJr
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Worried about the future/not saving enough

Post by CorradoJr » Sat Jun 22, 2019 1:28 pm

I’ve been trying to live the Boglehead life for several years however feel I am in need of a reality check or pep talk to make me feel better. I am by worrier in my personality and find myself, even though my wife and I are in our mid 40s, to be worried about saving enough for retirement and generally thinking what retirement will “be like” for us 20-25 years in the future.

I’d say roughly we have $200k in tax-advantaged accounts and roughly $200k equity in our house. Our HHI is also roughly $200k combined (we both have come a long way since our 30s and finally found careers/employers that are financially rewarding.) One issue is we seem to always carry a lot of debt, yet never make late payments. We have been doing 0% balance transfers for years and just sort of “move the ball around” with this $50k of debt. Some of it is from home improvements, some is a HELOC that I (foolishly) moved to a credit card, other is just goods/wants.

We live in a high cost of living area and have one young child who goes to (expensive but worth it) day care. Two years ago, I refinanced our house at 3.875% which is great but now I realize we just added 8 years back to the repayment. We have been maxing our Roth IRAs for the last 5-6 years and I started maxing my 401k this year.

Adding to this is my “hobby” of Finance sites, reading up on how to achieve the best results with your finances, and general market news (which is exhausting).

How can I best assess my situation? Avoiding Financial news is a start but it is a double-edged sword as I enjoy keeping abreast of world market and general business news. Every day however, I read articles telling me this is market top and be prepared for a crash, etc. Its really exhausting. Reading another thread, I lived through 9/11 and 2008-2009 but really was a kid and did not have significant assets invested.

Sorry if this a bit rambling, just looking for comments.

runner540
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Re: Worried about the future/not saving enough

Post by runner540 » Sat Jun 22, 2019 1:44 pm

CorradoJr, it's great that you have a healthy income and are now maxing retirement accounts. That tells me you have at least $30k available to save each year. Given what you describe (high income but frustrated with debt you can't pay down) you should check out the Dave Ramsey budgeting and snowball method to get rid of debt fast, and for good. (Keep coming back to Bogleheads for investments).
Your networth is about $350k ($200 retirement + $200 home equity - $50k debt). Given your ages and income, it can be much higher quickly if you get focused.
Good luck!

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Re: Worried about the future/not saving enough

Post by Grt2bOutdoors » Sat Jun 22, 2019 2:52 pm

How much disposable income do you have each month? Can you redirect some of that to reduce the $50k of mortgage debt?

Stop reading the newspaper on global market events. It’s not helping you - no one knows anything.

I was a few blocks away when 9/11 happened in NYC, it was devastating in more ways than you can imagine but even an event like that will not stop the progress of man. Look at all the invention and innovation since then. Do you believe even if there was a market interruption, that progress will halt? That the end of the world is near? If so, everyone would liquidate today, but you don’t see that do you? Like I said, turn off CNBC, use your extra time playing with your child and spend more time with your wife. You can control your expenses, how much you save and what amount of risk you take, that’s it!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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willthrill81
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Re: Worried about the future/not saving enough

Post by willthrill81 » Sat Jun 22, 2019 3:12 pm

Since you're in your mid-40s, I'm guessing that you would like to be able to retire in about 20 years. If at least you or your spouse max out Social Security benefits or come close, even with the anticipated 20% cut in benefits down the road, that would still come out to around $52k of annual income right there, with about 25% more if you deferred until age 70. Considering that your mortgage should be paid off by then and kids' related expenses should be mostly gone, with the possible exception of college, you'd probably be fine in your current area with something like $125k of annual retirement income. Assuming a 4% withdrawal rate, that would mean that you need almost $2 million in your portfolio ($125k-$50k = $75k; $75/.04 = $1.875M). If we assume a 4% inflation-adjusted return, that means that you would need to contribute about $65k for 20 years to reach that $2 million target. Yes, you could plan on not retiring until something like age 70, but I wouldn't advise that. There are too many potential hiccups that can happen along the way for that to be a prudent plan (e.g. one or both of you are unemployed for a while, unforeseen and significant child/family expenses, permanent pay cut, etc.).

Since you're currently in a high cost of living area, if you planned on leaving it for a lower cost of living area, that could make a significant difference in your needed portfolio goal. It could cut your needed portfolio value by around half, leaving you with around $90k of retirement income, still 50% more than the median household income today. That would also cut your needed annual savings by the same amount, and your anticipated income taxes in retirement would fall significantly as well. Such a plan would mean that your current savings of about $30k would almost get you there.

In all, I'd say that if you want to stay in your current area, you'll probably need to more than double your current annual savings. But if you plan on leaving it for a cheaper area, your current annual savings may be adequate. However, all of this is besides you paying off your credit card debt, which you definitely need to do while, at a minimum, you continue maxing out your 401k and Roth IRAs.
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Sandtrap
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Re: Worried about the future/not saving enough

Post by Sandtrap » Sat Jun 22, 2019 4:55 pm

CorradoJr wrote:
Sat Jun 22, 2019 1:28 pm
I’ve been trying to live the Boglehead life for several years however feel I am in need of a reality check or pep talk to make me feel better. I am by worrier in my personality and find myself, even though my wife and I are in our mid 40s, to be worried about saving enough for retirement and generally thinking what retirement will “be like” for us 20-25 years in the future.

I’d say roughly we have $200k in tax-advantaged accounts and roughly $200k equity in our house. Our HHI is also roughly $200k combined (we both have come a long way since our 30s and finally found careers/employers that are financially rewarding.) One issue is we seem to always carry a lot of debt, yet never make late payments. We have been doing 0% balance transfers for years and just sort of “move the ball around” with this $50k of debt. Some of it is from home improvements, some is a HELOC that I (foolishly) moved to a credit card, other is just goods/wants.

We live in a high cost of living area and have one young child who goes to (expensive but worth it) day care. Two years ago, I refinanced our house at 3.875% which is great but now I realize we just added 8 years back to the repayment. We have been maxing our Roth IRAs for the last 5-6 years and I started maxing my 401k this year.

Adding to this is my “hobby” of Finance sites, reading up on how to achieve the best results with your finances, and general market news (which is exhausting).

How can I best assess my situation? Avoiding Financial news is a start but it is a double-edged sword as I enjoy keeping abreast of world market and general business news. Every day however, I read articles telling me this is market top and be prepared for a crash, etc. Its really exhausting. Reading another thread, I lived through 9/11 and 2008-2009 but really was a kid and did not have significant assets invested.

Sorry if this a bit rambling, just looking for comments.
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Olemiss540
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Re: Worried about the future/not saving enough

Post by Olemiss540 » Sat Jun 22, 2019 4:59 pm

I just LOVE it when people say something is "expensive but worth it", when in reality it should be "expensive and can AFFORD it". Can anyone not realize it doesnt matter how much value something brings if you literally don't have the cash to buy it?

OP. With 50k in CC debt, you better believe I would be beans and rice. Try Dave Ramsey out for a spin!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Re: Worried about the future/not saving enough

Post by abuss368 » Sat Jun 22, 2019 6:37 pm

CorradoJr wrote:
Sat Jun 22, 2019 1:28 pm
I’ve been trying to live the Boglehead life for several years however feel I am in need of a reality check or pep talk to make me feel better. I am by worrier in my personality and find myself, even though my wife and I are in our mid 40s, to be worried about saving enough for retirement and generally thinking what retirement will “be like” for us 20-25 years in the future.

I’d say roughly we have $200k in tax-advantaged accounts and roughly $200k equity in our house. Our HHI is also roughly $200k combined (we both have come a long way since our 30s and finally found careers/employers that are financially rewarding.) One issue is we seem to always carry a lot of debt, yet never make late payments. We have been doing 0% balance transfers for years and just sort of “move the ball around” with this $50k of debt. Some of it is from home improvements, some is a HELOC that I (foolishly) moved to a credit card, other is just goods/wants.

We live in a high cost of living area and have one young child who goes to (expensive but worth it) day care. Two years ago, I refinanced our house at 3.875% which is great but now I realize we just added 8 years back to the repayment. We have been maxing our Roth IRAs for the last 5-6 years and I started maxing my 401k this year.

Adding to this is my “hobby” of Finance sites, reading up on how to achieve the best results with your finances, and general market news (which is exhausting).

How can I best assess my situation? Avoiding Financial news is a start but it is a double-edged sword as I enjoy keeping abreast of world market and general business news. Every day however, I read articles telling me this is market top and be prepared for a crash, etc. Its really exhausting. Reading another thread, I lived through 9/11 and 2008-2009 but really was a kid and did not have significant assets invested.

Sorry if this a bit rambling, just looking for comments.
You came to the right place for advice and support. I would recommend (if you are doubting or second guess) to list your portfolio allocations and any questions you may have. You will be rewarded with a lot of feedback and different thoughts and perspectives.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!"

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Watty
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Re: Worried about the future/not saving enough

Post by Watty » Sat Jun 22, 2019 7:06 pm

You will get better suggestions about your situation if you post your information in using the suggested guideline for asking portfolio questions, but you don't need to follow it exactly.

viewtopic.php?f=1&t=6212

mhalley
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Re: Worried about the future/not saving enough

Post by mhalley » Sun Jun 23, 2019 3:00 pm

Time to retire is all about the savings rate. 50 k in cc debt is an emergency, concur with Dave Ramsey.
MMM has a great article about the simple math here.

https://www.mrmoneymustache.com/2012/01 ... etirement/

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ruralavalon
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Re: Worried about the future/not saving enough

Post by ruralavalon » Sun Jun 23, 2019 3:55 pm

CorradoJr wrote:
Sat Jun 22, 2019 1:28 pm
I’ve been trying to live the Boglehead life for several years however feel I am in need of a reality check or pep talk to make me feel better. I am by worrier in my personality and find myself, even though my wife and I are in our mid 40s, to be worried about saving enough for retirement and generally thinking what retirement will “be like” for us 20-25 years in the future.
. . . . .
Adding to this is my “hobby” of Finance sites, reading up on how to achieve the best results with your finances, and general market news (which is exhausting).

How can I best assess my situation? Avoiding Financial news is a start but it is a double-edged sword as I enjoy keeping abreast of world market and general business news. Every day however, I read articles telling me this is market top and be prepared for a crash, etc.
Drop your hobby. Instead I suggest that you read one or two books on investing. Wiki article, "Books: recommendations and reviews".

Stop thinking about anything you cannot control or predict. It is a complete waste of time. Put mental effort into things that you can control and predict. Examples of what you can control and predict are debt, spending, savings rate, and investing expenses. Wiki article, Bogleheads® investment philosophy"

CorradoJr wrote:
Sat Jun 22, 2019 1:28 pm
One issue is we seem to always carry a lot of debt, yet never make late payments. We have been doing 0% balance transfers for years and just sort of “move the ball around” with this $50k of debt. Some of it is from home improvements, some is a HELOC that I (foolishly) moved to a credit card, other is just goods/wants.

We live in a high cost of living area and have one young child who goes to (expensive but worth it) day care. Two years ago, I refinanced our house at 3.875% which is great but now I realize we just added 8 years back to the repayment.
First, take a close look at your spending and budget. Try an accounting program or app like YNAB, Mint, Personal Capital, or Quicken to track spending. Find places to reduce spending. Be fairly ruthless with anything nonessential. No more home improvements.

Second, pay off that $50k debt using some of what you have saved from your spending. Stop just moving it around.


CorradoJr wrote:
Sat Jun 22, 2019 1:28 pm
I’d say roughly we have $200k in tax-advantaged accounts and roughly $200k equity in our house. Our HHI is also roughly $200k combined (we both have come a long way since our 30s and finally found careers/employers that are financially rewarding.)
. . . . .
We have been maxing our Roth IRAs for the last 5-6 years and I started maxing my 401k this year.

In your mid-40s just $200k in retirement investments is not good.

It is good to see your income is up and you are now doing better by making maximum contributions to your tax-advantaged accounts. With around 20 - 25 more years to contribute, you can finish well. It is not too late.

in addition (using some of what you have saved from your spending) open a taxable account at a low-cost firm like Vanguard or Fidelity. Invest in very tax-efficient stock index funds. Wiki article "Tax-efficient fund placement". At Vanguard I suggest using Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

. . . . .

To get anything more than a general pep talk you need to post more details of your spending, debt and the information called for in the link that Sandtrap and Watty gave you, "Asking Portfolio Questions". You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
Last edited by ruralavalon on Sun Jun 23, 2019 5:12 pm, edited 5 times in total.
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delamer
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Re: Worried about the future/not saving enough

Post by delamer » Sun Jun 23, 2019 4:11 pm

Your worries would decrease a lot if you direct your financial “energies” to coming up with a plan to payoff that $50,000 in debt.

You can’t control the stock market or the economy, but you can control your debt levels.

Given your incomes, you should be able to do so with 2 years (or less) if you budget properly. Which basically means only spending for necessities — no vacations, no eating out, no new clothes, etc. — until the debt is gone. And probably putting all required spending on a debit card (or check).

Good luck.

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Re: Worried about the future/not saving enough

Post by whodidntante » Sun Jun 23, 2019 5:19 pm

Identify waste in your spending then cut it. If you're eating out too often, stop. If you're taking too many vacations, stop it. If you're paying $200 for cable, pay $100 or become a cord cutter. Don't spend $20k on a new bathroom, but do fix the leaky toilet. If you're spending 5k/yr on a youth soccer league (apparently some do), see if you can spend less or zero. Make sure you don't have more insurance than you need. Basically identify what you need to do and do it.

Dave Ramsey isn't going to have you maxing your retirement accounts. I think his advice is imbalanced and often counterproductive. He takes extreme positions for radio. My general recommendation is not to listen to him, but it doesn't hurt to listen if you have enough education and context to evaluate what he is saying for your personal situation.

I don't think it's necessarily a problem to move 50k around at 0% indefinitely, but it will be a much more important emergency if you lose the ability to do that. If it's adding stress to your life you should unload it. I almost always owe something at 0%, although I do have the ability to pay it off and I don't pay fees to move it around so it is truly 0%.

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travelogue
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Re: Worried about the future/not saving enough

Post by travelogue » Sun Jun 23, 2019 6:05 pm

In addition to all above, the Bigger Pockets Money podcast has some good episodes on crushing debt. Can be good for inspiration, ideas, and hearing what’s possible.

https://www.biggerpockets.com/moneyshow

victw
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Re: Worried about the future/not saving enough

Post by victw » Sun Jun 23, 2019 7:24 pm

I'm a fan of YNAB. If nothing else - try it for 60 days and listen to their educational videos.
Seems like you have a little bit of a spending problem.

Vic

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scubadiver
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Re: Worried about the future/not saving enough

Post by scubadiver » Sun Jun 23, 2019 10:06 pm

Congrats, you're starting to turn the ship.

That said, you are almost certainly still spending too much money on unnecessary items, e.g., dining out, vacations, cars, electronics. Make elimination of the CC debt by next year this time a goal and starting cutting expenses until you find a credible path to achieving that goal. If you're having trouble finding such a path, post back to this thread with your monthly budget. We'll help you get there. :P

Good Luck!

Scubadiver

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Tamarind
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Re: Worried about the future/not saving enough

Post by Tamarind » Mon Jun 24, 2019 6:20 am

I think it's time to focus in on that debt. The changes you need to make to pay it off will really help you get in better shape for retirement.

At your income, there's no reason you shouldn't be able to max 2 401ks and 2 Roth IRAs - $50k of retirement savings. If that seems insurmountable, then identify what you must pay for instead and find a way to eliminate it.

Similarly, if you were serious about getting rid of that debt, it would be gone in a year or less. What is stopping you?

Remember that your savings rate has a much larger impact on your retirement best egg than the market does.

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CorradoJr
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Re: Worried about the future/not saving enough

Post by CorradoJr » Mon Jun 24, 2019 8:59 am

Thank you all for the thoughtful replies and advice. The amount of support people provide is incredible and makes me proud to be a member of this fine website.

When time allows (I have a toddler so not a lot of free time!) I will try to create a second posting with portfolio advice. I'm not entirely concerned with my portfolio as all of our tax-advantaged assets are in either the Target Retirement 2040 fund of an analog of the 3-fund portfolio.

Upon further reflection I feel I am fairly frugal, yet know this can't always be the case.
For example, here is a sample of expenses in a month:

$1950 child care
$1600 mortgage
$500 parking (we live in one of the top 5 urban areas by population and both commute together)
$200 fuel
$650 car payment (lease - and yes I know I'll get burned for this)
$500 student loan payments (have paid several small loans off over the past year)
$400 groceries (family of 3)
$200 dining out
$150 baby supplies (diapers, wipes, etc.)
$100 auto insurance
$200 clothing/shoes
$50 internet
$75 cell phone (2 lines, prepaid service)

I'm sure i'm forgetting some other categories, but these are the major ones.
Take home net pay is roughly $9600. At the end of the month, there is little to spare as most extra cash goes to debt/CC payments.

We do not have cable, only a cheap internet package. We also don't have netflix or hulu. We use PagePlus (cheap cell-phone plan).
We have one new car that we splurge on, and basic insurance.

Again, I don't "feel" like I am spending on lavish things (my favorite dining place is McDonalds and most of my clothes are 5-7 years old)...but maybe there is a leak in the budget somewhere?

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willthrill81
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Re: Worried about the future/not saving enough

Post by willthrill81 » Mon Jun 24, 2019 9:18 am

CorradoJr wrote:
Mon Jun 24, 2019 8:59 am
Thank you all for the thoughtful replies and advice. The amount of support people provide is incredible and makes me proud to be a member of this fine website.

When time allows (I have a toddler so not a lot of free time!) I will try to create a second posting with portfolio advice. I'm not entirely concerned with my portfolio as all of our tax-advantaged assets are in either the Target Retirement 2040 fund of an analog of the 3-fund portfolio.

Upon further reflection I feel I am fairly frugal, yet know this can't always be the case.
For example, here is a sample of expenses in a month:

$1950 child care
$1600 mortgage
$500 parking (we live in one of the top 5 urban areas by population and both commute together)
$200 fuel
$650 car payment (lease - and yes I know I'll get burned for this)
$500 student loan payments (have paid several small loans off over the past year)
$400 groceries (family of 3)
$200 dining out
$150 baby supplies (diapers, wipes, etc.)
$100 auto insurance
$200 clothing/shoes
$50 internet
$75 cell phone (2 lines, prepaid service)

I'm sure i'm forgetting some other categories, but these are the major ones.
Take home net pay is roughly $9600. At the end of the month, there is little to spare as most extra cash goes to debt/CC payments.

We do not have cable, only a cheap internet package. We also don't have netflix or hulu. We use PagePlus (cheap cell-phone plan).
We have one new car that we splurge on, and basic insurance.

Again, I don't "feel" like I am spending on lavish things (my favorite dining place is McDonalds and most of my clothes are 5-7 years old)...but maybe there is a leak in the budget somewhere?
Those items total $6,575 per month. Obviously, $2k per month for childcare for one child is steep, but you seem willing to devote almost a third of your household spending toward it. The car payment is high, but getting out of it might not be worthwhile, though you should check. You don't indicate what your net pay is, but knocking out the CC debt definitely seems to be your needed priority #1. How much do you owe on the student loans, and what are the interest rates?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

student
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Re: Worried about the future/not saving enough

Post by student » Mon Jun 24, 2019 9:28 am

CorradoJr wrote:
Mon Jun 24, 2019 8:59 am
Thank you all for the thoughtful replies and advice. The amount of support people provide is incredible and makes me proud to be a member of this fine website.

When time allows (I have a toddler so not a lot of free time!) I will try to create a second posting with portfolio advice. I'm not entirely concerned with my portfolio as all of our tax-advantaged assets are in either the Target Retirement 2040 fund of an analog of the 3-fund portfolio.

Upon further reflection I feel I am fairly frugal, yet know this can't always be the case.
For example, here is a sample of expenses in a month:

$1950 child care
$1600 mortgage
$500 parking (we live in one of the top 5 urban areas by population and both commute together)
$200 fuel
$650 car payment (lease - and yes I know I'll get burned for this)
$500 student loan payments (have paid several small loans off over the past year)
$400 groceries (family of 3)
$200 dining out
$150 baby supplies (diapers, wipes, etc.)
$100 auto insurance
$200 clothing/shoes
$50 internet
$75 cell phone (2 lines, prepaid service)

I'm sure i'm forgetting some other categories, but these are the major ones.
Take home net pay is roughly $9600. At the end of the month, there is little to spare as most extra cash goes to debt/CC payments.

We do not have cable, only a cheap internet package. We also don't have netflix or hulu. We use PagePlus (cheap cell-phone plan).
We have one new car that we splurge on, and basic insurance.

Again, I don't "feel" like I am spending on lavish things (my favorite dining place is McDonalds and most of my clothes are 5-7 years old)...but maybe there is a leak in the budget somewhere?
Apart from the car payment (which you already know is high), expenses look reasonable.

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ruralavalon
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Re: Worried about the future/not saving enough

Post by ruralavalon » Mon Jun 24, 2019 9:30 am

CorradoJr wrote:
Mon Jun 24, 2019 8:59 am
$50 internet
$75 cell phone (2 lines, prepaid service)

I'm sure i'm forgetting some other categories, but these are the major ones.
Take home net pay is roughly $9600. At the end of the month, there is little to spare as most extra cash goes to debt/CC payments.

We do not have cable, only a cheap internet package. We also don't have netflix or hulu. We use PagePlus (cheap cell-phone plan).
It does seem that you have avoided the more expensive electronics and entertainment choices which many others have fallen into.

It is good to see that any extra monthly goes into paying off debt.

Still I suggest using a budgeting app or software (YNAB, Mint, etc.) to track spending in detail, to search out places to cut.

My cheapo Tracfone service is $11/month.
Last edited by ruralavalon on Mon Jun 24, 2019 9:39 am, edited 1 time in total.
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runner540
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Re: Worried about the future/not saving enough

Post by runner540 » Mon Jun 24, 2019 9:37 am

CorradoJr wrote:
Mon Jun 24, 2019 8:59 am
Thank you all for the thoughtful replies and advice. The amount of support people provide is incredible and makes me proud to be a member of this fine website.

When time allows (I have a toddler so not a lot of free time!) I will try to create a second posting with portfolio advice. I'm not entirely concerned with my portfolio as all of our tax-advantaged assets are in either the Target Retirement 2040 fund of an analog of the 3-fund portfolio.

Upon further reflection I feel I am fairly frugal, yet know this can't always be the case.
For example, here is a sample of expenses in a month:

$1950 child care
$1600 mortgage
$500 parking (we live in one of the top 5 urban areas by population and both commute together)
$200 fuel
$650 car payment (lease - and yes I know I'll get burned for this)
$500 student loan payments (have paid several small loans off over the past year)
$400 groceries (family of 3)
$200 dining out
$150 baby supplies (diapers, wipes, etc.)
$100 auto insurance
$200 clothing/shoes
$50 internet
$75 cell phone (2 lines, prepaid service)

I'm sure i'm forgetting some other categories, but these are the major ones.
Take home net pay is roughly $9600. At the end of the month, there is little to spare as most extra cash goes to debt/CC payments.

We do not have cable, only a cheap internet package. We also don't have netflix or hulu. We use PagePlus (cheap cell-phone plan).
We have one new car that we splurge on, and basic insurance.

Again, I don't "feel" like I am spending on lavish things (my favorite dining place is McDonalds and most of my clothes are 5-7 years old)...but maybe there is a leak in the budget somewhere?
You are brave to post this and be open to feedback. You spend almost as much on ONE vehicle ($500 + $650 + $200 + $100 = $1450) as you do on the mortgage :shock:

That and your debts are why you feel so tight. Everything else looks reasonable. What about line items for life insurance, travel, medical copays? EDIT: where are utilities??

I'll reiterate that you should give Dave Ramsey a try: whatever you're currently doing isn't working for you.
Last edited by runner540 on Mon Jun 24, 2019 10:19 am, edited 1 time in total.

Dottie57
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Re: Worried about the future/not saving enough

Post by Dottie57 » Mon Jun 24, 2019 9:45 am

:happy How did you put together your list of expenses? Did you go through all of your credit cards and checking for several months or a year? Do you give gifts during the year? What about utilities? Home maintenance? Property tax and insurance? Medical?
Last edited by Dottie57 on Mon Jun 24, 2019 9:50 am, edited 3 times in total.

onourway
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Re: Worried about the future/not saving enough

Post by onourway » Mon Jun 24, 2019 9:47 am

You clearly need a budget. You are missing $3000/month, or 1/3 of your take-home to things you can't account for. And that's not including the additional spending you've been doing on credit. A budget accounts for every single cent of spending you do, not simply the bills you have to pay for on a specific deadline. Obviously the vehicles and childcare are major expenses, but they pale in comparison to the real problem of not knowing where this $3k is going every month. Others have suggested the software You Need A Budget and I 100% agree. It has the power to transform your financial life. On $200k income and those base expenses, once you get rid of the car lease and your kid is in kindergarten saving $75k/year or even more should be well within your reach, without materially changing your life once you start spending (and saving) with intention rather than flying by the seat of your pants.

mbasherp
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Re: Worried about the future/not saving enough

Post by mbasherp » Mon Jun 24, 2019 9:58 am

CorradoJr,

First, resolve to redirect the entire childcare amount to investments once your child is in school. That's a few years away at most. That's a lot of money.

Second, realize that eventually you will have to pay off the $50k in debt which you move around. Zero interest is good, but it doesn't mean you didn't borrow the money. It seems to be a burden both on your budget and mind, so I suggest making a concrete plan to pay it off.

Third, it seems like you really need to get a handle on where every dollar is going. Tracking most of it isn't enough. I run a monthly budget down to the penny so there's no lying to myself. Even something as simple as a Mint account will streamline this process. Then, you'll see some areas that can be cut and you can immediately redirect that money to either your debt payments or retirement investments.

I think your general worry is more related to the fact that you're still dealing with a nebulous situation. Clarify your situation and make some better plans and I think your worries will reduce and simplify. I'm a worrier to be sure, but the better I do with my own situation, the more worries are reduced to "what if I can't fulfill this plan." I can handle that.

You're not doing great financially, but not doing poorly either. You're at an inflection point where you can set yourself on a great path or entrench yourself in mediocrity. A couple good decisions will make that difference. All my best to you.

quantAndHold
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Re: Worried about the future/not saving enough

Post by quantAndHold » Mon Jun 24, 2019 9:58 am

You’re spending $1450/month on the car. That’s the leak in your budget. Given the price you’re paying for parking, I’m guessing you could live quite happily without having a car at all. Or if you’re out in the suburbs and that is for parking at the office, then could you commute by bus/train, and save the parking and fuel costs?

Regardless of the specifics of how you do it, I’m guessing you could knock $1000/month off of transportation costs without major impact to your lifestyle if you tried.

The other thing is that there’s a $3k gap between your take home pay and spending. Are you putting $3k towards debt every month? If not, you’re missing something in your spending list.

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travelogue
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Re: Worried about the future/not saving enough

Post by travelogue » Mon Jun 24, 2019 10:11 am

Agree on taking a hard look at car expenses. We’re in a HCOL area but partially offset that by my using public transportation for daily commute. We only have one fully paid off car and even with three kids it usually works. When we get in a transportation bind we fall back on Uber/Lyft, Zipcar, or rental car depending on the circumstances and what makes the most sense. You mention you’re in a major metro area, so something like this may be an option.

Cars can be some of the biggest contributors to ongoing expenses, so it makes sense to evaluate carefully and dispassionately.

E.g.: https://www.marketwatch.com/story/the-r ... 2019-06-21

Agree re YNAB.

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celia
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Re: Worried about the future/not saving enough

Post by celia » Mon Jun 24, 2019 10:40 am

To fill in the rest of your missing budget, you need to account for all your paycheck withholdings and all the cash you spend from your pockets. You should account for every dollar earned and where it goes.

Along with this you should “pay yourself first” by making savings one of your budget categories. That includes IRA and 401k contributions, 457 and savings for emergencies, vacations, home improvements, etc. but never spend all of that available savings. Lots of it will be needed in the future.

Just the act on tracking your expenses in detail will give you insight as to where your leaks are. Also develop a plan to track your year-end net worth each year to see if you are making year to year progress. Your savings should grow while your debt should shrink each year. (We have used a spreadsheet for the last 30 years and are now retired.)

delamer
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Re: Worried about the future/not saving enough

Post by delamer » Mon Jun 24, 2019 10:55 am

It doesn’t matter if the $200/month is going to 20 meals for $10 each at McDonald’s or 2 $100 meals at a nice restaurant.

That $200 could be going to pay off your debt and make you more financially secure.

Are you buying lunches at work? Between the two of you, you could easily be spending $75/week on those.

And with student loans, your non-mortgage debt is higher than $50,000.

I agree with an earlier comment that you should be tracking your expenses. You missed home utilities/maintenance, life insurance, vacations, entertainment, out-of-pocket medical on your list.

Cody6136
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Re: Worried about the future/not saving enough

Post by Cody6136 » Mon Jun 24, 2019 11:25 am

travelogue wrote:
Mon Jun 24, 2019 10:11 am
Agree on taking a hard look at car expenses. We’re in a HCOL area but partially offset that by my using public transportation for daily commute. We only have one fully paid off car and even with three kids it usually works. When we get in a transportation bind we fall back on Uber/Lyft, Zipcar, or rental car depending on the circumstances and what makes the most sense. You mention you’re in a major metro area, so something like this may be an option.

Cars can be some of the biggest contributors to ongoing expenses, so it makes sense to evaluate carefully and dispassionately.

E.g.: https://www.marketwatch.com/story/the-r ... 2019-06-21

Agree re YNAB.

Agree re: YNAB.

Your back-of-envelope budget leaves a lot to be desired.

Home insurance? Out-of-pocket medical? Health club? vending machines? Gifts for nieces, nephews? Awful office buddy who hits you up for their kids' cookies/races/ball team shirts and you always say yes? Pet? Pet grooming? Dues for running club? Dues for anything else? Haircuts, music site subscriptions, manicures, taxis, personal care, lawn care, seasonal lawn care, HOA fees, city taxes, unreimbursed business expenses.....Amazon midnight impulse buys, fit bit, sports gear, concerts,

You need all these categories and subcategories, and you need them for a 12-month period of time in order to find a flight path.

I promise that at least a few of your categories will leave you surprised and a little chagrined. That's progress.

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CorradoJr
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Re: Worried about the future/not saving enough

Post by CorradoJr » Mon Jun 24, 2019 2:16 pm

Thanks again for the helpful and insightful replies. Budget items are what I can remember back of the envelope, but there are things missing. I will repost again with a more complete picture of my finances.

I use Quicken 2007 on an old laptop. Nothing is automatic and I kind of like it this way. I've heard a lot about YNAB and other budgeting apps/programs but frankly, can't bring myself to paying for an app.

I realize at the end of the day that most budget threads devolve into "we mentioned this is not a good idea" and the reply from the OP is "I need it for ABC reasons", so I will avoid this type of discussion and want to change and take on all/any advice offered.

Eye opening for me - the car-related items do seem to be a large budget item each month. I do believe we need a car as we live in the suburbs, however pre-baby we used to take public transportation (roughly $300/month for 2 monthly passes.) We also used to have 2 cars, one of which we have now sold. With a small toddler and us all commuting together each day, the car does make our life easier. We also work longish hours (8am-6pm is normal) so try to make the most of the parking and commuting costs. Since we have a monthly parking spot, we are also able to use the parking spot on weekends to visit museums, parks, cultural events, etc. and thus never have to worry about finding a spot.

Just a few more items - I do almost all of the work around the house (yardwork, fixing items, car repair, etc.) and do not hire people unless it's absolutely necessary. I've built decks, repaired the furnace, HVAC, clothes washer, basic plumbing, landscaped, changed oil/tires, replaced various car parts, etc. by myself. I'm like doing these things to learn how things work and also save money.

I also now cut my own hair (short) to avoid any barber charges. I also don't really have any hobbies other than Internet surfing (which is basically free) because I don't have a lot of free time and I can't bring myself spending money on something "frivolous." I don't drink a lot (1-2 drinks a month), nor go to bars. We have older Iphone 6's. I'm not into sports. Again, I feel I'm fairly frugal with most things in my life, but some pieces of the puzzle are missing.

onourway
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Re: Worried about the future/not saving enough

Post by onourway » Mon Jun 24, 2019 2:32 pm

I agree that having a car with kids is effectively a need for anyone who doesn't live in a completely walkable urban center. There is so much time savings and accessibility to other activities that comes from owning a car that I would not take getting rid of it seriously. That said, a $650 lease is a huge luxury, and between that, fuel, parking and insurance, it's one that you can most easily cut. The utility of a $5000 vehicle paid for in cash is 99% the same as a brand new model.

Regarding the software, I really want to emphasize again that you appear to be a great candidate for YNAB. Do not get caught up on the fact that you have to pay for it. See the recent thread here 'frugal or cheap.' I am not being hyperbolic when I say that if you went full-in on the YNAB method, it might save you 100x its cost in the first year alone. And you don't need to continue to pay for it after it has taught you how to manage your cashflow. But you might well decide that it's worth every penny because of how much control it gives you over your finances. I have.

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scubadiver
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Re: Worried about the future/not saving enough

Post by scubadiver » Mon Jun 24, 2019 2:46 pm

How much do you still owe on student loans? Is that part of the $50K or in addition to that?

Glad to see you posted the monthly budget. I hope you will find that to be a useful exercise, but at a minimum it gives the forum members an opportunity to provide additional feedback.

Anyway, per your estimated monthly expenses and take home pay there is still a $3K gap. I'm sure some of that goes to other expenses you neglected to mention, e.g., utilities, but this would appear to represent a substantial sum of cash that could be applied on a monthly basis to eliminate the $50K of debt. What are the interest rates on the student loans vice the credit cards? I ask, because this would help to inform whether you should focus on one debt or another, or maybe even dial back your 401k contributions temporarily to eliminate high interest debt.

Scubadiver

fallingeggs
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Re: Worried about the future/not saving enough

Post by fallingeggs » Mon Jun 24, 2019 2:48 pm

Other than the car, you're doing about the best you can do, I think. The fact is that you're living/working in a VHOL city, but earning less than a VHOL salary. I'd never say you shouldn't live/work where you do because of this, but it is a trade off that you have to live with. Just keep plugging away at increasing your salary more than your expenses each year! And as willthrill81 pointed out, being willing to retire to a cheaper place might be the key. This isn't to say you can't be within reaching distance of where you are at now, but maybe it's an hour+ commute to visit museums, restaurants, etc. on the weekends will work just fine.

As for the car, it isn't so much that you are leasing per se. It's that you're leasing an Audi or BMW where a Toyota would work just fine and fit better in your budget. You could easily free up $400 a month (and pay down that credit card before it bits you in the butt) by downgrading for a few leases till you are more comfortable with your retirement fund. I am forcing myself to do this as well, with the hopes of being able to get a nice car (X5/Land Rover) in 10 or so years. But retirement first, car second.

PS--It sounds like you bring your child into the city for day care. Have you recently looked into options to drop him off closer to where you live to take advantage of cheaper suburban rates? Maybe it didn't make sense when you started off, but perhaps things have changed (or will change over the next few years). It is worth revisiting from time to time to at least check it off that you gave it honest consideration.

PSS--I'm a fan of Mint. It isn't perfect, but does give you a window into what you're spending and will help you prioritize.

mbasherp
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Re: Worried about the future/not saving enough

Post by mbasherp » Tue Jun 25, 2019 8:18 am

CorradoJr wrote:
Mon Jun 24, 2019 2:16 pm

I use Quicken 2007 on an old laptop. Nothing is automatic and I kind of like it this way. I've heard a lot about YNAB and other budgeting apps/programs but frankly, can't bring myself to paying for an app.
Mint is completely free and is owned by Intuit, the same company millions trust through their use of TurboTax and QuickBooks. I know YNAB has its fans, but I never understood paying for a product when an alternative is free, especially when it comes to fixing a budget. Rather ironic.

I used Mint when I was hopelessly in debt with no assets and I still use it today in a (thankfully) totally different position. No single thing has helped me turn my life around more.

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CorradoJr
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Re: Worried about the future/not saving enough

Post by CorradoJr » Tue Jun 25, 2019 8:23 am

willthrill81 wrote:
Mon Jun 24, 2019 9:18 am

How much do you owe on the student loans, and what are the interest rates?
To help answer this question willthrill81 and a few others have asked, here is the student loan breakdown:

$9k at 4.75% variable
$5k at 5.25% variable
$37k at 3.5% fixed

I should say that in our early 30s, both my wife and I walked away from our "entry level" jobs to pursue grad school full time and then reentered the job market several years later. We are slowly chipping away at the remaining student loan debt. While it set us back a lot financially, it certainly opened a lot of doors to more better paying careers.

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ruralavalon
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Re: Worried about the future/not saving enough

Post by ruralavalon » Tue Jun 25, 2019 8:31 am

mbasherp wrote:
Tue Jun 25, 2019 8:18 am
CorradoJr wrote:
Mon Jun 24, 2019 2:16 pm

I use Quicken 2007 on an old laptop. Nothing is automatic and I kind of like it this way. I've heard a lot about YNAB and other budgeting apps/programs but frankly, can't bring myself to paying for an app.
Mint is completely free and is owned by Intuit, the same company millions trust through their use of TurboTax and QuickBooks. I know YNAB has its fans, but I never understood paying for a product when an alternative is free, especially when it comes to fixing a budget. Rather ironic.

I used Mint when I was hopelessly in debt with no assets and I still use it today in a (thankfully) totally different position. No single thing has helped me turn my life around more.
Quicken is good enough for tracking spending.

I use Quicken though I don't like it and and find it cumbersome. I am just too lazy to switch to anything else.
CorradoJr wrote:
Tue Jun 25, 2019 8:23 am
To help answer this question willthrill81 and a few others have asked, here is the student loan breakdown:

$9k at 4.75% variable
$5k at 5.25% variable
$37k at 3.5% fixed
You are already making maximum annual contributions to your tax-advantaged accounts.

To state the obvious, the first priority for the cash saved from your budget is to pay off the two small, high interest, variable interest rate student loans.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

onourway
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Re: Worried about the future/not saving enough

Post by onourway » Tue Jun 25, 2019 9:07 am

mbasherp wrote:
Tue Jun 25, 2019 8:18 am
Mint is completely free and is owned by Intuit, the same company millions trust through their use of TurboTax and QuickBooks. I know YNAB has its fans, but I never understood paying for a product when an alternative is free, especially when it comes to fixing a budget. Rather ironic.

I used Mint when I was hopelessly in debt with no assets and I still use it today in a (thankfully) totally different position. No single thing has helped me turn my life around more.
I pay for a product over a free alternative when the paid product is substantially better. IMO YNAB easily pays for itself.

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willthrill81
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Re: Worried about the future/not saving enough

Post by willthrill81 » Tue Jun 25, 2019 9:37 am

ruralavalon wrote:
Tue Jun 25, 2019 8:31 am
CorradoJr wrote:
Tue Jun 25, 2019 8:23 am
To help answer this question willthrill81 and a few others have asked, here is the student loan breakdown:

$9k at 4.75% variable
$5k at 5.25% variable
$37k at 3.5% fixed
You are already making maximum annual contributions to your tax-advantaged accounts.

To state the obvious, the first priority for the cash saved from your budget is to pay off the two small, high interest, variable interest rate student loans.
:thumbsup
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Thegame14
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Re: Worried about the future/not saving enough

Post by Thegame14 » Tue Jun 25, 2019 10:16 am

the leak in the budget is the car payment of $650, but you said you know that this would be brought up. That is what a $50K car? What does it do that a pre-owned car for $15-20K wouldn't do?

IF you have that monthly or a lower monthly bill, you could use the difference to pay down those loans faster.

Also for being in your mid 40's you are behind on retirement, especially for the $200K HHI, which sounds like it is fairly new income level.

You said you are maxing "your" 401K this year, what about DW? Does she work, have a 401K. Id try to max out her 401K if she has one as you are in a high tax bracket with $200K of income.

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Re: Worried about the future/not saving enough

Post by pkcrafter » Tue Jun 25, 2019 10:43 am

CorradoJr wrote:
Sat Jun 22, 2019 1:28 pm

You are getting lots of good advice and you will find if/when you post according to our recommended format that it will get you focused.


I’ve been trying to live the Boglehead life for several years however feel I am in need of a reality check or pep talk to make me feel better. I am by worrier in my personality and find myself, even though my wife and I are in our mid 40s, to be worried about saving enough for retirement and generally thinking what retirement will “be like” for us 20-25 years in the future.

I’d say roughly we have $200k in tax-advantaged accounts and roughly $200k equity in our house. Our HHI is also roughly $200k combined (we both have come a long way since our 30s and finally found careers/employers that are financially rewarding.) One issue is we seem to always carry a lot of debt, yet never make late payments. We have been doing 0% balance transfers for years and just sort of “move the ball around” with this $50k of debt. Some of it is from home improvements, some is a HELOC that I (foolishly) moved to a credit card, other is just goods/wants.

50k on credit cards? What is the interest rate?

We have been maxing our Roth IRAs for the last 5-6 years and I started maxing my 401k this year.

OK, that's 31k/year to retirement (15.5% saving rate). That is a good savings rate for someone who doesn't need to play catch-up. You should probably try to raise the saving rate to 18-20% for awhile.

Are you getting a match?
Does your wife have a 401k? Any match with it?

What is your overall asset allocation?


Adding to this is my “hobby” of Finance sites, reading up on how to achieve the best results with your finances, and general market news (which is exhausting).

Yes, it definitely can be exhausting and there is no payout.


Paul

When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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