[Just got married] Looking for ways to cut down on my budget

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Topic Author
gazelle1991
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[Just got married] Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 3:32 pm

I recently got married and just sat down with my DH to look over the budget post marriage for the first time. The numbers surprised us, not that we are living way above our means, but we were under the impression that we were doing so well and had much more room than the numbers suggest.

We are thinking about having a baby within the year so looking for areas where we can cut down on expenses, and save up before and when the baby comes. I am having a hard time slashing the budget as I thought I was already being frugal. I am budgeting on my base income only. Bonus payments from work go towards maxing out tax-deferred accounts.

We live in a tier 2 -> tier 3-ish city in terms of cost of living. Median house price around $350K.

Total budget: 150K per year or $12,500 per month
Estimated tax: 45K or (~30%)
Estimated savings: 18K (~12%)
Estimated expenses: 87K/year or $7,217/month (58%)

Fixed expenses: Total $4,867
Housing Mortgage + Maintenance: $2,650 on a 15 year, 10-year left on payment. After that expense will be around $850 for tax, insurance, maintenance, and one-off expenses to repaint the outside, replace roof, etc.
Utility & Trash: 250
HVAC + Water Heater Loan: 467 at 0% rate for 3 years
Insurance (car/health/dental/life/legal): $500
Expected child care: 1K

Variable expenses: Total $2,350
Food & Restaurant: $500 (mostly grocery, restaurants maybe $100-$150/month)
Shopping: $300 (holiday gifts for people, wedding gifts, household purchases, and other items that we buy)
Travel: $300 (1 international trip every year to see my family that costs 2400 for the 2 of us and then another 1200 budgeted for domestic trips)
Gas: $150 for 2 cars
Car Sinking Fund: $250 for 2 cars for oil changes, regular maintenance, other fixes
Medical Sinking Fund: $350 for 2 adults (regular exams and office visits before hitting deductible)
Expected child expenses: $500 - strollers, cribs, clothes, food, doctor visits, etc.

My husband makes ~60K in income too but all of his earnings go towards paying off his massive student loan debt.

One area I can see cutting back on is travel (maybe make the international trip home once every couple of years instead of once every year or getting rid of my car since I am wfh and just spend money on uber as needed). Is there anything else you would cut? Am I overestimating the costs for child care and other child related expenses? I have heard it's expensive. I wonder how people with much less income than me get by, but then again I used to make a lot less and saved just as much. Maybe lifestyle inflation caught up to me even though I don't feel like I am living extravagantly either.

Thanks for the inputs in advance.
Last edited by gazelle1991 on Fri Nov 01, 2019 1:55 pm, edited 5 times in total.

mptfan
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by mptfan » Thu Oct 31, 2019 3:37 pm

gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
We live in a tier 2 -> tier 3-ish city in terms of cost of living.
I don't know what that means. Are the tiers published anywhere?

oldfatguy
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by oldfatguy » Thu Oct 31, 2019 3:38 pm

gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
wonder how people with much less income than me get by, but then again I used to make a lot less and saved just as much. Maybe lifestyle inflation caught up to me even though I don't feel like I am living extravagantly either.
Those with much less income than you spend a lot less on taxes, savings, and housing. They probably spend less on other things, as well, but those are the 3 biggest differences.

Conch55
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Conch55 » Thu Oct 31, 2019 3:42 pm

Expected child expenses: $500
While I am well past the age to really know, this seems to be a high monthly estimate. Plus the HVAC + Water Heater Loan is not a long term expense.

wootwoot
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by wootwoot » Thu Oct 31, 2019 3:42 pm

You can refi to a 30 year mortgage if you need more immediate cash on hand.

Gill
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Gill » Thu Oct 31, 2019 3:48 pm

Are you sure of the $45,000 figure on taxes? Is that Federal & State income tax as well as Social Security?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

H-Town
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by H-Town » Thu Oct 31, 2019 3:57 pm

gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
I recently got married and just sat down with my DH to look over the budget post marriage for the first time. The numbers surprised us, not that we are living way above our means, but we were under the impression that we were doing so well and had much more room than the numbers suggest.

We are thinking about having a baby within the year so looking for areas where we can cut down on expenses, and save up before and when the baby comes. I am having a hard time slashing the budget as I thought I was already being frugal. I am budgeting on my base income only.

We live in a tier 2 -> tier 3-ish city in terms of cost of living.

Total budget: 150K per year or $12,500 per month
Estimated tax: 45K or (~30%)
Estimated savings: 18K (~12%)
Estimated expenses: 87K/year or $7,217/month (58%)

Fixed expenses: Total $4,867
Housing Mortgage + Maintenance: $2,650 on a 15 year
Utility & Trash: 250
HVAC + Water Heater Loan: 467 at 0% rate for 3 years
Insurance (car/health/dental/life/legal): $500
Expected child care: 1K

Variable expenses: Total $2,350
Food & Restaurant: $500
Shopping: $300 (holiday gifts for people, wedding gifts, household purchases, and other items that we buy)
Travel: $300 (1 international trip every year to see my family that costs 2400 for the 2 of us and then another 1200 budgeted for domestic trips)
Gas: $150
Car Sinking Fund: $250 for 2 cars for oil changes, regular maintenance, other fixes
Medical Sinking Fund: $350 for 2 adults (regular exams and office visits before hitting deductible)
Expected child expenses: $500 - strollers, cribs, clothes, food, doctor visits, etc.

My husband makes ~60K in income too but all of his earnings go towards paying off his massive student loan debt.

One area I can see cutting back on is travel (maybe make the international trip home once every couple of years instead of once every year or getting rid of my car since I am wfh and just spend money on uber as needed). Is there anything else you would cut? Am I overestimating the costs for child care and other child related expenses? I have heard it's expensive. I wonder how people with much less income than me get by, but then again I used to make a lot less and saved just as much. Maybe lifestyle inflation caught up to me even though I don't feel like I am living extravagantly either.

Thanks for the inputs in advance.
I don't think you live extravagantly either. I wouldn't cut back travelling as you won't have much time and energy to travel when you have young children. The funds you set aside for childcare and child expenses are not the current expense. I consider it as savings. You put away your savings to the big pot. So your actual expense is around 68k. The majority of it is housing cost - which I think it is what it is.

I think you've done well overall. Just try to maintain your living costs. You'll find more savings in the future when your DH paid off his student loan, and maybe pay raises to come.

Jags4186
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Jags4186 » Thu Oct 31, 2019 4:00 pm

I’m confused, do you make $150k and your husband makes $60k? Or do you make $90k and your husband makes $60k?

Either way, unless you have some sort of medical issue, why are you spending $350/month on “medical sinking fund”? Yearly physicals are free with health insurance.

What is legal insurance and why do you have it? Are you an attorney and is it malpractice insurance? If so that’s a business expense.

What is your PI, T, I and “maintenance” breakdown. The $467 a month towards on HVAC system seems like the “maintenance” for a while.

Lots of people, when they have kids, spend almost all of their money. Especially when childcare is factored in. Lower income folks don’t buy $500 worth of strollers a month, may have family watch children instead of daycare, live in apartments or lower cost rental homes, don’t have $600/mo of “sinking funds”, don’t spend $3600/yr on vacations, and don’t eat out much.

HomeStretch
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by HomeStretch » Thu Oct 31, 2019 4:10 pm

~1/3 of your joint gross income is going towards taxes and another 1/3 towards student loan/mortgage debt. That leaves only 1/3 for savings and living expenses.

Consider refinancing to a 30-year term to give yourselves some breathing room. You can always pay extra towards principal if you have extra cash flow for a month.

What is the balance of spouse’s student loans? Is he paying ~$42K/year ($60k salary after 30% taxes) just to meet minimum payments or paying extra against principal? Are there any opportunities for spouse to earn more income and/or refinance student loans for a lower rate?

Aggressive debt repayment is fine. But consider upping your savings to 15% even if you have to reduce debt repayments a bit. Make sure you have an adequate emergency fund and are contributing enough to receive full employer 401k matches, if applicable.
Last edited by HomeStretch on Thu Oct 31, 2019 4:13 pm, edited 1 time in total.

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JoeRetire
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by JoeRetire » Thu Oct 31, 2019 4:11 pm

Lots of people get by on 60k.
gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
We live in a tier 2 -> tier 3-ish city in terms of cost of living.
Not sure what these tiers mean. Perhaps you could move to a lower cost of living area.
Housing Mortgage + Maintenance: $2,650 on a 15 year
Obviously, you could lower your costs by refinancing to a 30 year mortgage.
Expected child care: 1K
You could find alternate, less expensive child care.
Food & Restaurant: $500
You could cut out the restaurants.
Shopping: $300 (holiday gifts for people, wedding gifts, household purchases, and other items that we buy)
You could purchase fewer/less expensive gifts.
Travel: $300 (1 international trip every year to see my family that costs 2400 for the 2 of us and then another 1200 budgeted for domestic trips)
You could travel less often.
Gas: $150
You could share rides, ride a bike, use public transportation, drive less.
Car Sinking Fund: $250 for 2 cars for oil changes, regular maintenance, other fixes
Seems like a lot per month. Not sure where that's all going. You could do your own oil changes.
Medical Sinking Fund: $350 for 2 adults (regular exams and office visits before hitting deductible)
$350/month to cover deductibles? That seems like a lot.
Expected child expenses: $500 - strollers, cribs, clothes, food, doctor visits, etc.
Get less expensive strollers, cribs, etc. Family or second hand stores are cheaper.
Don't be a lemming.

nimo956
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by nimo956 » Thu Oct 31, 2019 4:12 pm

I have the same income, am married, and live outside of NYC.

For comparison:
Savings- $60k
Housing, Util, and Insurance is about the same
We spend slightly less on food/gas, though not by much.

HVAC/Water Heater + Child Care + Travel + Car Sinking + Medical Sink + Expected Child = $2.2k

We don't have any of the above expenses so there's the difference right there. The HVAC is temporary and you can't do anything about child care. I'd say that the car sink + medical sink + expected child expenses seem really high.
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KlangFool
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by KlangFool » Thu Oct 31, 2019 4:13 pm

gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm

Total budget: 150K per year or $12,500 per month
Estimated tax: 45K or (~30%)
Estimated savings: 18K (~12%)


Fixed expenses: Total $4,867
Housing Mortgage + Maintenance: $2,650 on a 15 year
gazelle1991,

Your big expenses are taxes and the mortgage.

1) Refinance your mortgage to 30 years.

2) Put the amount save from your mortgage payment into both you and your spouse tax-deferred accounts. This saves you 20+% taxes from the reduced mortgage payment.

3) This will bring down your taxes and increase your savings with no change to all other expenses.

By not maxing up your tax-deferred account, you are paying 20+% to 30% taxes on all those expenses.

KlangFool

Topic Author
gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:16 pm

Jags4186 wrote:
Thu Oct 31, 2019 4:00 pm
I’m confused, do you make $150k and your husband makes $60k? Or do you make $90k and your husband makes $60k?

Either way, unless you have some sort of medical issue, why are you spending $350/month on “medical sinking fund”? Yearly physicals are free with health insurance.

What is legal insurance and why do you have it? Are you an attorney and is it malpractice insurance? If so that’s a business expense.

What is your PI, T, I and “maintenance” breakdown. The $467 a month towards on HVAC system seems like the “maintenance” for a while.

Lots of people, when they have kids, spend almost all of their money. Especially when childcare is factored in. Lower income folks don’t buy $500 worth of strollers a month, may have family watch children instead of daycare, live in apartments or lower cost rental homes, don’t have $600/mo of “sinking funds”, don’t spend $3600/yr on vacations, and don’t eat out much.
I make $150K and my husband makes $60K.

Maybe the medical sinking fund is high, but estimated based on historical spending and expected pregnancy visits.

Not a lawyer. Legal insurance is only $20/month for any legal needs (setting up wills, legal helps, legal questions, etc.). Can cancel at any times.
Last edited by gazelle1991 on Thu Oct 31, 2019 4:25 pm, edited 1 time in total.

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ray.james
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by ray.james » Thu Oct 31, 2019 4:17 pm

gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm

Total budget: 150K per year or $12,500 per month
Estimated tax: 45K or (~30%)
Taxes on 150k+60k = 210k income should average out to ~25% including SS/med, fed & state.(for us in CA it did.)

Some are suggesting - water heater and HVAC are temporary. However, there will be some line item like that always - furniture, car ,appliances etc., So just count that as part of budget.
Expected child expenses: $500 - strollers, cribs, clothes, food, doctor visits, etc.
This is an outlier. Usually in our experience a 500-800 one time costs and then 100-150 bucks for diapers/forums/clothes on sales every few months on recurring. 500 per month, every month seems very high. Also kids until they reach 3/4 like inexpensive stuff like cardboard boxes, balls, spoons, utensils, papers, pen rather than all the toys we used to buy. For most one time items like jumper, napping chair, pack and play, toys - get used/cheap sales as Kids grow out of them in a very short time. More permanent/longer needed items like carseat/transport system for first kid, crib, high chair - you would face the one time cost.
Medical Sinking Fund: $350 for 2 adults (regular exams and office visits before hitting deductible)
If this HDHP, make sure you are using HSA.

Beyond that, if you like more cashflow, you can chose 20/30 year term until spouse pay off the loans.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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ray.james
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by ray.james » Thu Oct 31, 2019 4:21 pm

KlangFool wrote:
Thu Oct 31, 2019 4:13 pm
gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm

Total budget: 150K per year or $12,500 per month
Estimated tax: 45K or (~30%)
Estimated savings: 18K (~12%)


Fixed expenses: Total $4,867
Housing Mortgage + Maintenance: $2,650 on a 15 year
gazelle1991,

Your big expenses are taxes and the mortgage.

1) Refinance your mortgage to 30 years.

2) Put the amount save from your mortgage payment into both you and your spouse tax-deferred accounts. This saves you 20+% taxes from the reduced mortgage payment.

3) This will bring down your taxes and increase your savings with no change to all other expenses.

By not maxing up your tax-deferred account, you are paying 20+% to 30% taxes on all those expenses.

KlangFool
+ this. Klangfool put it very well.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

Topic Author
gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:27 pm

Gill wrote:
Thu Oct 31, 2019 3:48 pm
Are you sure of the $45,000 figure on taxes? Is that Federal & State income tax as well as Social Security?
Gill
Give or take. yes include federal, state, social security, and medicare tax. Does that seem too low or too high? My past effective tax rates have been around 28%, making less so estimating 30% now.

delamer
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by delamer » Thu Oct 31, 2019 4:32 pm

Are you literally paying $60,000/year toward your husband’s student loans?

Because you are paying about $13,000 in federal taxes and $4,500 in payroll taxes due to his job.

So if that $17,500 is in your expenses above and you are paying $60,000 toward his loans too, then you are distorting your numbers since his income isn’t in your total budget.

If the above is accurate, then you could reduce the loan payments to his “net after taxes” (about $42,500) to give yourselves some breathing room.

EDIT: With the large student loans and a 15-year mortgage, things may seem tight now. But that will change. But I agree with others that increasing your tax-deferred savings is a good idea.
Last edited by delamer on Thu Oct 31, 2019 4:40 pm, edited 1 time in total.

Thegame14
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Thegame14 » Thu Oct 31, 2019 4:34 pm

I think you are UNDER estimating child care, most reputable child care for a baby is $1,500 and up.

Topic Author
gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:34 pm

HomeStretch wrote:
Thu Oct 31, 2019 4:10 pm
~1/3 of your joint gross income is going towards taxes and another 1/3 towards student loan/mortgage debt. That leaves only 1/3 for savings and living expenses.

Consider refinancing to a 30-year term to give yourselves some breathing room. You can always pay extra towards principal if you have extra cash flow for a month.

What is the balance of spouse’s student loans? Is he paying ~$42K/year ($60k salary after 30% taxes) just to meet minimum payments or paying extra against principal? Are there any opportunities for spouse to earn more income and/or refinance student loans for a lower rate?

Aggressive debt repayment is fine. But consider upping your savings to 15% even if you have to reduce debt repayments a bit. Make sure you have an adequate emergency fund and are contributing enough to receive full employer 401k matches, if applicable.
Student loan = 250K balance, 6% interest rate. Expected payoff in 8-10 years if his income doesn't go up. I am currently maxing out our retirement accounts with the line item budget for the child (since the child isn't here yet) and my 30K-tax of bonus from work now. Trying to see if I need to cut back (have room to cut back elsewhere) to continue to max that out once the child arrives.

Topic Author
gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:43 pm

Thegame14 wrote:
Thu Oct 31, 2019 4:34 pm
I think you are UNDER estimating child care, most reputable child care for a baby is $1,500 and up.
oh no...so maybe I cannot afford this not yet conceived child until the student loan is paid off...

Others have suggested that there might be some conservatism in my sinking fund estimates so maybe that will balance out.

Topic Author
gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:47 pm

KlangFool wrote:
Thu Oct 31, 2019 4:13 pm
gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm

Total budget: 150K per year or $12,500 per month
Estimated tax: 45K or (~30%)
Estimated savings: 18K (~12%)


Fixed expenses: Total $4,867
Housing Mortgage + Maintenance: $2,650 on a 15 year
gazelle1991,

Your big expenses are taxes and the mortgage.

1) Refinance your mortgage to 30 years.

2) Put the amount save from your mortgage payment into both you and your spouse tax-deferred accounts. This saves you 20+% taxes from the reduced mortgage payment.

3) This will bring down your taxes and increase your savings with no change to all other expenses.

By not maxing up your tax-deferred account, you are paying 20+% to 30% taxes on all those expenses.

KlangFool
Yes, that's the goal. Currently maxing out tax-deferred accounts using 1) child budget since the child is not here yet. 2) bonus from work. I only use my base salary to budget for that purpose.

Once the child comes, then might have to consider refinance or slow paying the student loan. Although, I currently have a very advantageous rate at 2.75% so not sure if refinance will help much.

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gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:53 pm

nimo956 wrote:
Thu Oct 31, 2019 4:12 pm
I have the same income, am married, and live outside of NYC.

For comparison:
Savings- $60k
Housing, Util, and Insurance is about the same
We spend slightly less on food/gas, though not by much.

HVAC/Water Heater + Child Care + Travel + Car Sinking + Medical Sink + Expected Child = $2.2k

We don't have any of the above expenses so there's the difference right there. The HVAC is temporary and you can't do anything about child care. I'd say that the car sink + medical sink + expected child expenses seem really high.
Wow 60K is a lot of savings. "We don't have any of the above expenses so there's the difference right there." Does that mean you don't have any kids, do not travel much, don't own a car, and have very good health insurance?

The good thing is that those expenses are estimates and go towards savings so maybe I don't end up needing to use that much but wanted to be better safe than sorry.

Topic Author
gazelle1991
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 4:54 pm

JoeRetire wrote:
Thu Oct 31, 2019 4:11 pm
Lots of people get by on 60k.
gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
We live in a tier 2 -> tier 3-ish city in terms of cost of living.
Not sure what these tiers mean. Perhaps you could move to a lower cost of living area.
Housing Mortgage + Maintenance: $2,650 on a 15 year
Obviously, you could lower your costs by refinancing to a 30 year mortgage.
Expected child care: 1K
You could find alternate, less expensive child care.
Food & Restaurant: $500
You could cut out the restaurants.
Shopping: $300 (holiday gifts for people, wedding gifts, household purchases, and other items that we buy)
You could purchase fewer/less expensive gifts.
Travel: $300 (1 international trip every year to see my family that costs 2400 for the 2 of us and then another 1200 budgeted for domestic trips)
You could travel less often.
Gas: $150
You could share rides, ride a bike, use public transportation, drive less.
Car Sinking Fund: $250 for 2 cars for oil changes, regular maintenance, other fixes
Seems like a lot per month. Not sure where that's all going. You could do your own oil changes.
Medical Sinking Fund: $350 for 2 adults (regular exams and office visits before hitting deductible)
$350/month to cover deductibles? That seems like a lot.
Expected child expenses: $500 - strollers, cribs, clothes, food, doctor visits, etc.
Get less expensive strollers, cribs, etc. Family or second hand stores are cheaper.
wow...super helpful...what is the alternate, less expensive child care?

nimo956
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by nimo956 » Thu Oct 31, 2019 5:00 pm

gazelle1991 wrote:
Thu Oct 31, 2019 4:53 pm

Wow 60K is a lot of savings. "We don't have any of the above expenses so there's the difference right there." Does that mean you don't have any kids, do not travel much, don't own a car, and have very good health insurance?

The good thing is that those expenses are estimates and go towards savings so maybe I don't end up needing to use that much but wanted to be better safe than sorry.
Correct, no kids, no car since we live near NYC, don't travel much, and I don't think I've had any big out of pocket medical expenses in the last 5+ years.
50% VTI / 50% VXUS

runner540
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by runner540 » Thu Oct 31, 2019 5:09 pm

If you use your bonus to pay off the HVAC loan, that would help your cash flow. Do you have an emergency fund?
My guess is that your job ($150k salary + bonus) is the kind where you don't have a lot of free time. Can your husband take a second job to increase income? Or change jobs to get more income to payoff the student loan faster? 8-10 years means you're paying only $25-30k/year, not his full salary.

I think $1500/month of childcare and child expenses is about right if you are not in a major city and can be frugal on the gear.

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climber2020
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by climber2020 » Thu Oct 31, 2019 5:17 pm

We kept our big expenses low - house and cars - and the rest is insignificant.

It's hard to live on 60k a year when you're spending 53% of it on the house.

Lars_2013
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Lars_2013 » Thu Oct 31, 2019 5:18 pm

My partner and I are DINKs, so no child-related expenses. That said, we spend a lot less than you in many budget areas to live in a metro area with a median home price of $235,000 according to Zillow (so, about the U.S. average). Not counting charitable giving, taxes, and retirement savings, our spending is about $45,000/year.

Our gross income (2 working adults) is ~$120,000/year. Payroll + income taxes are ~$20,000/year; this is low in part because we are putting over $30,000 a year into pre-tax retirement savings.

We have a 15-year mortgage with PITI of $900/month (our home value is below the median for the metro area and we paid down some of the mortgage before we refinanced, so our principal when we refinanced was just $100k). This was a choice we made and continue to make -- most of our friends live in more expensive areas and spend much more on their housing expenses.

We spend about $100/month on transportation expenses -- we mostly walk or bike to work and share 1 car.

We do spend an average of $200/month on specialty food, medicine, and vet visits for our elderly cats.

We have good employer-sponsored health insurance and our premium for 2 adults is just $250/month.

Most years we spend a bit less than you on travel, but we also don't have international family.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 5:22 pm

runner540 wrote:
Thu Oct 31, 2019 5:09 pm
If you use your bonus to pay off the HVAC loan, that would help your cash flow. Do you have an emergency fund?
My guess is that your job ($150k salary + bonus) is the kind where you don't have a lot of free time. Can your husband take a second job to increase income? Or change jobs to get more income to payoff the student loan faster? 8-10 years means you're paying only $25-30k/year, not his full salary.

I think $1500/month of childcare and child expenses is about right if you are not in a major city and can be frugal on the gear.
oh the horror of child care...

We are planning to pay about $3,000/month towards student loans, so about $36K/year. The rest goes to taxes (~18K) and employer sponsored simple IRA, which were not counted in the budget. Since we just got married the last few months, I guess I am still doing the mental accounting of his vs. mine.

We do have a substantial emergency fund and had done well investing before thinking about having kids. :oops: and for that matter getting married since that was another slight increase in tax, but decided it was worth the commitment.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 5:27 pm

Lars_2013 wrote:
Thu Oct 31, 2019 5:18 pm
My partner and I are DINKs, so no child-related expenses. That said, we spend a lot less than you in many budget areas to live in a metro area with a median home price of $235,000 according to Zillow (so, about the U.S. average). Not counting charitable giving, taxes, and retirement savings, our spending is about $45,000/year.

Our gross income (2 working adults) is ~$120,000/year. Payroll + income taxes are ~$20,000/year; this is low in part because we are putting over $30,000 a year into pre-tax retirement savings.

We have a 15-year mortgage with PITI of $900/month (our home value is below the median for the metro area and we paid down some of the mortgage before we refinanced, so our principal when we refinanced was just $100k). This was a choice we made and continue to make -- most of our friends live in more expensive areas and spend much more on their housing expenses.

We spend about $100/month on transportation expenses -- we mostly walk or bike to work and share 1 car.

We do spend an average of $200/month on specialty food, medicine, and vet visits for our elderly cats.

We have good employer-sponsored health insurance and our premium for 2 adults is just $250/month.

Most years we spend a bit less than you on travel, but we also don't have international family.
This gives me something to think about. I will ponder on reducing the big expense items like housing. With that out of the way, your expenses look more similar to ours pre-kid.

Thank you!

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by 22twain » Thu Oct 31, 2019 5:37 pm

mptfan wrote:
Thu Oct 31, 2019 3:37 pm
gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
We live in a tier 2 -> tier 3-ish city in terms of cost of living.
I don't know what that means. Are the tiers published anywhere?
+1

I don't think I've ever seen US cities ranked in "tiers." I tried a Google search for "tier 2 cities" and got mainly references to cities in India.
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by bryanm » Thu Oct 31, 2019 5:43 pm

gazelle1991 wrote:
Thu Oct 31, 2019 4:34 pm
Student loan = 250K balance, 6% interest rate. Expected payoff in 8-10 years if his income doesn't go up. I am currently maxing out our retirement accounts with the line item budget for the child (since the child isn't here yet) and my 30K-tax of bonus from work now. Trying to see if I need to cut back (have room to cut back elsewhere) to continue to max that out once the child arrives.
Have you considered re-financing this to lower your rate or monthly payments? When my kiddo was born I pushed the loan rate out as far as possible for cash flow purposes, and have since re-fi'd to ~3.5% on a 5 year term.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by HomeStretch » Thu Oct 31, 2019 5:50 pm

gazelle1991 wrote:
Thu Oct 31, 2019 4:47 pm
Yes, that's the goal. Currently maxing out tax-deferred accounts using 1) child budget since the child is not here yet. 2) bonus from work. I only use my base salary to budget for that purpose.
Your budgeting is disjointed as it’s based only on your base salary/all taxes/all expenses, then his salary is a separate pool, your bonus is a separate pool and the baby expenses in your original post’s budget are really being used now for tax-deferred savings.

Perhaps you need to adjust the way you budget. Consider including in your budget:

1. Income - both your base salaries $210k

2. Savings - “maxing out tax-deferred account” should mean contributing $19k each or $38k (vs $18k in original post). Are you saving $38k in his/her 401ks? That is 18% of your base salaries which is much better than your original post’s budget of $18k or 12%

3. Taxes - all payroll and income taxes on joint income. If this is your first year filing jointly, do a 2019 federal and state income tax projection to make sure you have your joint tax expense right and are withholding the proper amount.

4. Expenses - current living expenses (excluding future baby) with just your required mortgage and student loan repayments

5. Net Income = 1- 2 - 3 - 4; this is your excess monthly cash flow that you can use for additional debt principal payments or savings

6. Net Bonus - in years you get a bonus, consider saving $6k each in a Roth IRA and putting the excess towards debt, if you want

7. Future baby expenses - estimate and, when your family grows, fund baby expenses first by reducing additional debt repayments per #5 and #6. Perhaps put a bit towards 529 college savings.

Just a thought.
Last edited by HomeStretch on Thu Oct 31, 2019 5:55 pm, edited 1 time in total.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by delamer » Thu Oct 31, 2019 5:53 pm

gazelle1991 wrote:
Thu Oct 31, 2019 5:22 pm
runner540 wrote:
Thu Oct 31, 2019 5:09 pm
If you use your bonus to pay off the HVAC loan, that would help your cash flow. Do you have an emergency fund?
My guess is that your job ($150k salary + bonus) is the kind where you don't have a lot of free time. Can your husband take a second job to increase income? Or change jobs to get more income to payoff the student loan faster? 8-10 years means you're paying only $25-30k/year, not his full salary.

I think $1500/month of childcare and child expenses is about right if you are not in a major city and can be frugal on the gear.
oh the horror of child care...

We are planning to pay about $3,000/month towards student loans, so about $36K/year. The rest goes to taxes (~18K) and employer sponsored simple IRA, which were not counted in the budget. Since we just got married the last few months, I guess I am still doing the mental accounting of his vs. mine.

We do have a substantial emergency fund and had done well investing before thinking about having kids. :oops: and for that matter getting married since that was another slight increase in tax, but decided it was worth the commitment.
If you aren’t including your husband’s payroll taxes or income taxes on his job in your initial budget, then I think you’re too high on taxes unless you have pretty high state/local income taxes.

Try putting your whole family income into the TaxCaster app (to estimate federal taxes), and work from there.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by jb1 » Thu Oct 31, 2019 5:55 pm

Lower your mortgage via renting it out etc. Nearly 25% of your income goes to it.

/thread.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Nate79 » Thu Oct 31, 2019 6:02 pm

To answer the thread title families who live on $60k per year have much less house, much less cars, don't take international vacations, hopefully don't have the significant debt load that you have, don't put their kids in expensive childcare, don't save much, etc.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by HomeStretch » Thu Oct 31, 2019 6:05 pm

gazelle1991 wrote:
Thu Oct 31, 2019 4:34 pm
Student loan = 250K balance, 6% interest rate. Expected payoff in 8-10 years if his income doesn't go up.
Has spouse looked into student loan refinancing rates? SoFi and Laurel Road are showing lower rates. There may be other good refi lenders too.

Your mortgage rate is 2.75% per a later post so I can see why you don’t want to refi your 15-year term. But consider a refi with a longer term if you need the breathing room in your budget.

I’d suggest putting extra principal payments towards the higher rate debt (student loans) if you’re comfortable with that.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by FI4LIFE » Thu Oct 31, 2019 6:20 pm

We live in a slightly higher COL area and daycare runs anywhere from $40-65 per day, per child. Depends on the facility and how many days you are sending the child per week. While the kids are young, they are not particularly expensive, otherwise. You may want to think about a college savings account so your kids can avoid your husband's situation. That is a crazy amount of student debt.

I do not think your medical sinking fund is high at all.

Without addressing housing and transportation it is difficult to make much of an impact, unfortunately.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Watty » Thu Oct 31, 2019 6:50 pm

gazelle1991 wrote:
Thu Oct 31, 2019 3:32 pm
The numbers surprised us, not that we are living way above our means, but we were under the impression that we were doing so well and had much more room than the numbers suggest.
One thing that I do is to update a simple spreadsheet with my net worth each year on January 1st. That allows me to see the progress that is I am making. In your situation your net worth would increase as the student loans and mortage are paid down so it would be good to be able to see that. It would take a few years to get enough history to how what is going on but it would be good to get that started.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by fortfun » Thu Oct 31, 2019 6:55 pm

DW and I had a taxable income of 60k last year. Here are a few things we do:

Get rid of Amazon prime. Too easy to spend money on crap you don't need.
Get rid of cable.
Use only a work mobile phone (if provided).
Get rid of land line phone.
Stop eating out. Learn to cook. If you eat out, find a reasonable place to eat out (usually lunch). Drinking out is expensive.
Stop the runs to Target, Walmart, Costco, sam's club. Get rid of their memberships. You just buy crap you don't need.
Use your library for movies, books, entertainment.
Use bonus points on credit cards for travel. Open cards for bonus, spend minimum for bonus, cancel card. Repeat.
Minimize spending on clothing.
Pack lunch. Make your own coffee.
Shop around for car and home insurance (every time you need to renew).
Drive reliable/inexpensive vehicles (Toyota).
Rent out part of your house (if possible).
Buy store brands. Try to keep grocery spending as low as possible. Lots of information showing organic, etc. is not worth the money (get the same crap but pay more for it).
Stay healthy (if possible). Diet, exercise, take care of teeth.
If you have kids, don't over spend on them. Really not necessary.
Do online banking/cds, etc for emergency fund. Don't bank with banks that rip you off (i.e Wells Fargo).
Learn how to fix your own house, cars, etc. Do your own lawn mowing, house cleaning, etc.
Don't try to keep up with the Jones's.
Do the other stuff that you mentioned: Auto max 401ks, 403bs, 457etc. Max Roth IRAs.
Only borrow money for home. <4% interest.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Ivygirl » Thu Oct 31, 2019 6:57 pm

You may be trying to accomplish too many large goals within the amount of money available.

Trying to pay off your house in 15 years, pay off your husband's quarter-million-dollar student loans, have a baby and shower it with everything good, save (frankly) huge amounts for retirement and multiple other goals - well you are stressed because it cannot be done. Rather, it should not.

Your plan (in my opinion of things) should be detailed in the long range and fuzzy in the short range. Where you will be in 15 years should be clear in your mind. Where you are now needs flexibility.

In 15 years: the house is paid off. DH's student loans are paid off. You as-yet-unborn child is in high school, is almost ready to drive and might be researching colleges. Your retirement funds are fat from steady contributions.

You are in a hurry and I understand but festina lente, make haste slowly. Trying to optimize too much will worry everybody involved and still not achieve the same results as patience and steady application to your goals.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by willthrill81 » Thu Oct 31, 2019 7:05 pm

The Bureau of Labor Statistics' Consume Expenditure Survey explains in pretty fine detail how U.S. consumers spend their money.

Those with household income between $50,000-$69,999 spend the following annually (note that most of these categories are broken out in much further detail):
Housing (including utilities and all phone services) $18,274
Transportation $9,158
Food $7,168
Apparel and services $1,514
Personal insurance and pensions $5,163
Healthcare $4,739
Entertainment $2,392
Cash contributions $1,369
Pets, toys, hobbies, etc. $714
Education $731
Personal care $668
Tobacco $391
Reading $93
Misc. $930
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 7:07 pm

Ivygirl wrote:
Thu Oct 31, 2019 6:57 pm
You may be trying to accomplish too many large goals within the amount of money available.

Trying to pay off your house in 15 years, pay off your husband's quarter-million-dollar student loans, have a baby and shower it with everything good, save (frankly) huge amounts for retirement and multiple other goals - well you are stressed because it cannot be done. Rather, it should not.

Your plan (in my opinion of things) should be detailed in the long range and fuzzy in the short range. Where you will be in 15 years should be clear in your mind. Where you are now needs flexibility.

In 15 years: the house is paid off. DH's student loans are paid off. You as-yet-unborn child is in high school, is almost ready to drive and might be researching colleges. Your retirement funds are fat from steady contributions.

You are in a hurry and I understand but festina lente, make haste slowly. Trying to optimize too much will worry everybody involved and still not achieve the same results as patience and steady application to your goals.
Good points! Well taken.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Starfish » Thu Oct 31, 2019 7:34 pm

gazelle1991 wrote:
Thu Oct 31, 2019 4:34 pm
HomeStretch wrote:
Thu Oct 31, 2019 4:10 pm
~1/3 of your joint gross income is going towards taxes and another 1/3 towards student loan/mortgage debt. That leaves only 1/3 for savings and living expenses.

Consider refinancing to a 30-year term to give yourselves some breathing room. You can always pay extra towards principal if you have extra cash flow for a month.

What is the balance of spouse’s student loans? Is he paying ~$42K/year ($60k salary after 30% taxes) just to meet minimum payments or paying extra against principal? Are there any opportunities for spouse to earn more income and/or refinance student loans for a lower rate?

Aggressive debt repayment is fine. But consider upping your savings to 15% even if you have to reduce debt repayments a bit. Make sure you have an adequate emergency fund and are contributing enough to receive full employer 401k matches, if applicable.

Student loan = 250K balance, 6% interest rate. Expected payoff in 8-10 years if his income doesn't go up. I am currently maxing out our retirement accounts with the line item budget for the child (since the child isn't here yet) and my 30K-tax of bonus from work now. Trying to see if I need to cut back (have room to cut back elsewhere) to continue to max that out once the child arrives.
We had almost 200k in student loans but the interest on most was under 2%. This was 2008-2016 but the interest rates are still small. We were not citizens so our choices were limited. I had my fisrt job out of grad school, no previous loans except for cars, so my credit score was not exceptional.
A part of these loans at 5-6%, and we paid them fist, but probably around 70% was at very low interest rates.
I was under the impression that student loans have very favorable interest rates. I am surprised to hear of 6% rates for the entire amount.
I also don't understand why/how would somebody take 250k$ in loans for 60k$ on income. 250k$ is an MBA or medical degree cost where the ratio loan/income is very different.

I don't thing is anything wrong with your budget. You need a large income to pay 250k@6% and a largish 15years mortgage and have a kid at the same time.
Did you look at SoFi and similar services for student loan refi?

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Re: [Just got married] Looking for ways to cut down on my budget

Post by LadyGeek » Thu Oct 31, 2019 7:53 pm

I clarified the thread title. Please stay focused on the OP's questions.
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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by dodecahedron » Thu Oct 31, 2019 8:07 pm

Nate79 wrote:
Thu Oct 31, 2019 6:02 pm
To answer the thread title families who live on $60k per year have much less house, much less cars, don't take international vacations, hopefully don't have the significant debt load that you have, don't put their kids in expensive childcare, don't save much, etc.
Also, families who live on $60K per year pay essentially zero (or possibly less) in income taxes if they have kids under 17. If you decide to take some time off your $150K per year job after your child is born, your taxes would go down a lot.

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Re: [Just got married] Looking for ways to cut down on my budget

Post by Nate79 » Thu Oct 31, 2019 8:30 pm

It's nice to try and cut a budget but the problem is also on the income side. Someone with such horribly large student loans should be making much more than $60k else they exceedingly wasted their money on an expensive education. I would work on increasing that income significantly.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by Thegame14 » Thu Oct 31, 2019 8:33 pm

gazelle1991 wrote:
Thu Oct 31, 2019 4:34 pm
HomeStretch wrote:
Thu Oct 31, 2019 4:10 pm
~1/3 of your joint gross income is going towards taxes and another 1/3 towards student loan/mortgage debt. That leaves only 1/3 for savings and living expenses.

Consider refinancing to a 30-year term to give yourselves some breathing room. You can always pay extra towards principal if you have extra cash flow for a month.

What is the balance of spouse’s student loans? Is he paying ~$42K/year ($60k salary after 30% taxes) just to meet minimum payments or paying extra against principal? Are there any opportunities for spouse to earn more income and/or refinance student loans for a lower rate?

Aggressive debt repayment is fine. But consider upping your savings to 15% even if you have to reduce debt repayments a bit. Make sure you have an adequate emergency fund and are contributing enough to receive full employer 401k matches, if applicable.
Student loan = 250K balance, 6% interest rate. Expected payoff in 8-10 years if his income doesn't go up. I am currently maxing out our retirement accounts with the line item budget for the child (since the child isn't here yet) and my 30K-tax of bonus from work now. Trying to see if I need to cut back (have room to cut back elsewhere) to continue to max that out once the child arrives.
How old are you? Id want to have all student loans paid off before kids. Also that is an insane amount of loans for him to only be making $60K, seems like something is odd there, unless his income is expected to jump eventually

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Re: [Just got married] Looking for ways to cut down on my budget

Post by DonIce » Thu Oct 31, 2019 8:35 pm

Debt repayment is savings (it increases your net worth). Your husband is contributing probably ~$50k (after tax) to debt repayment + the 18k you listed as what you're saving in the OP. Out of your combined after tax income of ~160k, you're saving > 40%.

So you're doing great, relax and enjoy life.

On the financial side, just make sure to make the most use possible of any tax-advantaged retirement savings to reduce your tax burden. Analyzing your budget to try to cut things down by a few hundred bucks given a >40% savings rate is not super important in my opinion. If anything, you should be looking at where else you can spend some money to buy back your time. Time will be by far your more scarce resource, especially after you have a kid.

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Re: How do people live on an average household income of 60K? Looking for ways to cut down on my budget

Post by gazelle1991 » Thu Oct 31, 2019 8:52 pm

Thegame14 wrote:
Thu Oct 31, 2019 8:33 pm
gazelle1991 wrote:
Thu Oct 31, 2019 4:34 pm
HomeStretch wrote:
Thu Oct 31, 2019 4:10 pm
~1/3 of your joint gross income is going towards taxes and another 1/3 towards student loan/mortgage debt. That leaves only 1/3 for savings and living expenses.

Consider refinancing to a 30-year term to give yourselves some breathing room. You can always pay extra towards principal if you have extra cash flow for a month.

What is the balance of spouse’s student loans? Is he paying ~$42K/year ($60k salary after 30% taxes) just to meet minimum payments or paying extra against principal? Are there any opportunities for spouse to earn more income and/or refinance student loans for a lower rate?

Aggressive debt repayment is fine. But consider upping your savings to 15% even if you have to reduce debt repayments a bit. Make sure you have an adequate emergency fund and are contributing enough to receive full employer 401k matches, if applicable.
Student loan = 250K balance, 6% interest rate. Expected payoff in 8-10 years if his income doesn't go up. I am currently maxing out our retirement accounts with the line item budget for the child (since the child isn't here yet) and my 30K-tax of bonus from work now. Trying to see if I need to cut back (have room to cut back elsewhere) to continue to max that out once the child arrives.
How old are you? Id want to have all student loans paid off before kids. Also that is an insane amount of loans for him to only be making $60K, seems like something is odd there, unless his income is expected to jump eventually
i am 28 and husband is 29. Chiropractic school. Horrible return on investment but that ship has sailed. it’s probably easier for my income to increase another 30-40K than for him to increase his, but never know, biz might pick up. After another 30-40k income increase, my pay is probably going to plateau from there.

The goal is to have kid before i turn 30. Trying to semi-retire at 35-40 too lol. So like someone said, maybe doing too much all at the same time.

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Re: [Just got married] Looking for ways to cut down on my budget

Post by random_walker_77 » Thu Oct 31, 2019 9:00 pm

I agree w/ ivygirl. Also, do consider that you're saving more than you think you are. Your husband is paying off ~$15k/yr in interest, but the rest of loan balance repayment can be thought of as equivalent to savings. On a 15yr mortgage, a greater percentage of that payment is towards principal repayment, and that is also effectively savings.

As to the budget, it doesn't look unreasonable. Childcare in a lower cost of living locale could be under $1K/mo, and even if it's 1500/month, you'll be fine. Note that it can cost a bit more when the child is less than 24 months old.

As to baby stuff, you'll want to buy some things new (i.e. car seat, and arguably a crib), but $6K/yr is probably overly-conservative. Especially if you get lots of baby clothes and toys second-hand. We didn't need to buy second-hand, but did anyways. Worked out great. My wife picked up boxes of clothes on craigslist, and oftentimes some clothes were brand-new w/ tags. Kids grow quickly, and can outgrow new clothes before you get around to pulling them out...

The 250/month (3K/yr) for cars seems high for maintenance. About right if this includes a car replacement fund, assuming you keep cars for 10-15 years.

It's normal for budgets to get tight when you've just gotten into a house and have young kids. Daycare is expensive, but it gets better. As careers advance and income grows, your mortgage becomes a relatively smaller portion of your budget, and when the kids are in school, that frees up more funds.

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