2018 Budget Helps/Comments

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crazygrow
Posts: 61
Joined: Sun Apr 24, 2016 8:56 am

2018 Budget Helps/Comments

Post by crazygrow » Sun Nov 19, 2017 12:53 pm

Hi all,

Been here for a while but haven't done a big intro post, but now am looking at next year's budget and would love some comments/thoughts/direction. Apologies in advance for a long post.

Me (Husband) 39
Wife 41 (stay at home mom; recently started a small blog that is generating a small amount of income but that is excluded here)
Six kids (11,11,11,9,7,4) - go to public school, involved in your typical kids stuff - soccer (1 boy), swim (2 boys), dance (3 girls)

Insurance pretty well taken care of - the wife and I have term (me $3M, her $500k) that expires when we are mid/early 50s = kids will be leaving house about the same time.
Carry $1M umbrella as well
Great health insurance through work, switching to HDHP plan this next year so have access to HSA for first time

Assets:
Home: Zillow value at $610k; mortgage at $150k. Rate at 2.875% on 15 year. We sold a rental this year and dropped that money on the mortgage to get down to that $150k.
Cash: $150k
401k: $150k
Unvested RSUs: About $240k (get more every year and have been selling as they vest)

Liabilities:
Home Mortgage: $150k, 2.875% rate
Car loans: $45k, 0% rate
Student loans: $7k, .875% rate

Overall, I would classify ourselves as "poor" savers and that's why I've been reading this board. Some of this is by choice - we love traveling and teaching our children through experiences - and some of it is just poor planning/budgeting. We have also been more focused on paying down debt vs. taxable savings. Our fixed monthly expenses look like this:
Net Pay: ~$14,000 (in non-bonus/RSU vesting months) after maxing out 401k
Mortgage $2600
Student Loans $144
Car loans $1000
Groceries/Home Sundries: $2500-$3k
Auto insurance: $145
Auto Gas $500
Utilities $500
Kids Activiites ~1700/month (sports, piano lessons, ski lessons, math club, etc.)
Charitable donations . $1500
We spent about $30k/travel this year as well, so $2500/month. Next year will likely be 1/2 of that. We've decided to do a "big" family trip every other year (2017/2019/etc.)
Medical stuff $500 (not reimbursable stuff - my wife has had some weird medical stuff and we've resorted to holistic medical stuff and it is working!

And then just a whole bunch of other...stuff. Had to replace our mattress of 13 years, gifts for each other, etc.

So please comment on the above - don't hold back, but also how we get to the below
2019 goal: Beyond maxing out 401k, get to $2k/month in taxable savings.

Goal is to balance between kids and FI with a goal of 55 (16 years from now), although I don't think I would retire fully.
Last edited by crazygrow on Mon Jan 29, 2018 5:42 pm, edited 1 time in total.

jtravisdavid
Posts: 83
Joined: Thu Mar 01, 2007 12:21 pm

Re: 2018 Budget Helps/Comments

Post by jtravisdavid » Sun Nov 19, 2017 12:59 pm

How about use cash to pay off mortgage. Then divert what you would have been paying for your monthly mortgage into taxable savings. No change in lifestyle needed!

crazygrow
Posts: 61
Joined: Sun Apr 24, 2016 8:56 am

Re: 2018 Budget Helps/Comments

Post by crazygrow » Sun Nov 19, 2017 1:01 pm

jtravisdavid wrote:
Sun Nov 19, 2017 12:59 pm
How about use cash to pay off mortgage. Then divert what you would have been paying for your monthly mortgage into taxable savings. No change in lifestyle needed!
Definitely have considered it, although that is our emergency fund as well. I'm a pretty conservative investor if you can't tell (with that $150k in cash). I was going to use my upcoming bonus with the cash to wipe it out, but that bonus likely isn't going to happen due to company performance.

jlcnuke
Posts: 434
Joined: Thu Mar 16, 2017 10:26 am

Re: 2018 Budget Helps/Comments

Post by jlcnuke » Sun Nov 19, 2017 2:50 pm

crazygrow wrote:
Sun Nov 19, 2017 12:53 pm


Overall, I would classify ourselves as "poor" savers and that's why I've been reading this board. Some of this is by choice - we love traveling and teaching our children through experiences - and some of it is just poor planning/budgeting. We have also been more focused on paying down debt vs. taxable savings. Our fixed monthly expenses look like this:
Net Pay: ~$14,000 (in non-bonus/RSU vesting months) after maxing out 401k
Mortgage $2600
Student Loans $144
Car loans $1000
Groceries/Home Sundries: $2500-$3k
Auto insurance: $145
Auto Gas $500
Utilities $500
Kids Activiites ~1700/month (sports, piano lessons, ski lessons, math club, etc.)
Charitable donations . $1500
We spent about $30k/travel this year as well, so $2500/month. Next year will likely be 1/2 of that. We've decided to do a "big" family trip every other year (2017/2019/etc.)
Medical stuff $500 (not reimbursable stuff - my wife has had some weird medical stuff and we've resorted to holistic medical stuff and it is working!

And then just a whole bunch of other...stuff. Had to replace our mattress of 13 years, gifts for each other, etc.

So please comment on the above - don't hold back, but also how we get to the below
2019 goal: Beyond maxing out 401k, get to $2k/month in taxable savings.

Goal is to balance between kids and FI with a goal of 55 (16 years from now), although I don't think I would retire fully.
$3k/month on groceries is outrageously high, even for 8 people. You *should* be able to cut that in half and still eat very well.

$500/month in gas seems like a ton to me as well, as driving one car around when not trying to "save" on gas puts my fuel bill around $80/month for a car. 6 people could commute 20 miles each way in separate cars using premium gas and come in under your gas bill... including going and running errands etc as well.

I'm all for helping others. Right now, however, you have a total savings rate of $18,000/~$350,000/year, or 5%. While that's better than some people, it puts your retirement date right around the same time as you pass away or start collecting full social security benefits. Without a massive change in your savings rate, a large inheritance, or some other financial windfall, you have little chance of retiring anywhere near 55 with your current spending rate.

Cut your food bill in half, cut your vacation spending in half or more, and maybe cut back on some of the charitable contributions, and maybe you'll be on track. I won't get into the debate about whether it's worth spending $12,000/year for depreciating assets either..

lakja
Posts: 51
Joined: Mon Nov 06, 2017 5:34 pm

Re: 2018 Budget Helps/Comments

Post by lakja » Sun Nov 19, 2017 2:53 pm

Some obvious areas to cut are car loans, mortgage, and charitable giving. Honestly, with your monthly expenses, $150k only buys you 10 months. There’s also the single income risk since your wife doesn’t work, so it’s important to keep those funds available. Make sure that cash is earning >1%. Also, at your age and income, $150k in 401k is really low. You should be maxing out $18k every year at a minimum, which will help to decrease your tax bill.

The car loan is 0% interest, but it’s sucking half of the taxable income you want to save/month. Consider paying it off or selling it to go with a cheaper car with cash. This could also lower fuel cost ($500/month is huge), maintenance, insurance, and property tax in the vehicles.

Maybe cut your charitable giving to $500 or $0. Make sure you’re not giving money away that could be going to max out your tax advantaged retirement accounts.

All of your kids are in school except the 4 year old. You should consider your wife getting a job to help bring some cash flow into the house. It’s worth considering if you want to bring extra income in, but probably an argument with your wife.

Another area that you didn’t ask about, but I’ll bring up is college funding. I’m not sure what you want to do for your children’s college, but three - 11 year olds will be a large expense in the very near future.

My final point will be that it seems like you’ve enjoyed a very nice lifestyle, but you’re living paycheck to paycheck to support it. I’m not judging; you’ve clearly worked hard and demonstrated your value to your firm. However, you will likely need to cut some areas out to get in good financial shape to be FI in 16 years.

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