Please critique my Savings Rate... 36yo, Engaged, No Kids

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MortgageOnBlack
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Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by MortgageOnBlack »

Please critique my Savings Rate. I appreciate as many opinions as possible.

Age: 36 years old
Status: Engaged, Soon to be Married
Kids: None, but soon (1-2)? (fiancee is 7 years younger than me)
Current Gross Earnings: $74,000 ($6,166.66 a month)
Current After-Tax Earnings: $54,288 ($4,524 a month)

Total Emergency Fund: $50,000 (This is used for Emergencies or Investment Oppurtunities)
Ally Bank CD = $40,000
I-Bonds = $10,000

Total Debt: $211,000
Mortgage: $211,000 (20 years remaining, 3.375%). This amount (as well as Escrow, Utilities, and Maintenance) is split 50/50 with Fiancee. We pay the minimum every month, no extra prinicipal.

Total Current Retirement Portfolio: ~$100,000
Rollover IRA (Traditional) = $65,000
100% in Vanguard LifeStrategy Growth Fund (80/20)

Roth IRA = $35,000
100% Vanguard LifeStrategy Growth Fund (80/20)

Strategy the past 5 years:
Maxing out ROTH ($500 per month DCA). Increase Savings until I reach $50,000 in Emergency Fund.

Proposed Strategy:
Now that I've reached $50,000 in my Emergency Fund, I plan on investing in my Taxable Vanguard Brokerage account (VTSAX and VTIAX). I'm not sure what amount I would like to contribute and could use some help finding a balance.

Here is a breakdown of all my monthly expenses:

HOUSING,UTILITIES,SHARED EXPENSES: $1200 (my fiancee' matches this amount as well for the house)
CELLPHONE: $25
CAR - GAS: $80
CAR - INSURANCE: $80
CAR - MAINTENANCE: $80
FOOD/GROCERIES: $300
ENTERTAINMENT/BEER/DINING OUT: $100
TOTAL EXPENSES: $1865

MONEY LEFT-OVER FOR SAVING/INVESTING/SPENDING: $2,659
ROTH: -$500

After my Roth contribution, I have $2,159 left-over. How much should I commit to investing every month? I don't have access to any other retirement accounts (just a ROTH/Traditional IRA so all extra investing will need to be done in Taxable). I am considering using some of the left-over money to replace my car and/or fun/travel, but I'm not sure how much is too much. Also, I'm not sure how much to plan for children. I would like to put together a Savings Rate that I can stick with it for the long-haul and would like to start this on May 1st. Any input?
Makefile
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Joined: Fri Apr 22, 2016 11:03 pm

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by Makefile »

I don't know that I can say what savings right is right for you aside from mentioning that if on top of the Roth IRA, you were to put another $500, $750, or $1000 per month in your taxable account that would put your total savings rate at just about 15%, 20%, or 25%, respectively, which I think are considered on the adequate-to-high side except for the FIRE crowd.

But I really wanted to post to ask if you have looked into an HSA for some tax advantaged space, if your health insurance is compatible. However, children could change the calculation on that. It is possible to opportunistically switch between HDHP and non-HDHP insurance at open enrollment every year. You just have to be careful about the annual limit if you don't have the HDHP the entire year.

And you're sure no employer retirement plan is available?
as9
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Joined: Mon Jan 27, 2020 9:26 am

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by as9 »

Does your fiance have cash or retirement savings? Income? Other than splitting housing costs have you figured out how you'll be managing your finances together?

It's hard to give any advice here without the complete picture unless you've decided to keep your finances entirely separate from one another.
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MortgageOnBlack
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Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by MortgageOnBlack »

Makefile wrote: Fri Mar 27, 2020 2:01 pm I don't know that I can say what savings right is right for you aside from mentioning that if on top of the Roth IRA, you were to put another $500, $750, or $1000 per month in your taxable account that would put your total savings rate at just about 15%, 20%, or 25%, respectively, which I think are considered on the adequate-to-high side except for the FIRE crowd.

But I really wanted to post to ask if you have looked into an HSA for some tax advantaged space, if your health insurance is compatible. However, children could change the calculation on that. It is possible to opportunistically switch between HDHP and non-HDHP insurance at open enrollment every year. You just have to be careful about the annual limit if you don't have the HDHP the entire year.

And you're sure no employer retirement plan is available?
I didn't know what an HSA was until you mentioned it, but I will research. I have a employee health care plan that I pay 50% of (this amount is reflected with my after-tax amount).

My employer is a very small company. There is no retirement plan available. Fortunately, we do have a health insurance plan that is paid for 50%. I priced their plan with the healtcare marketplace and I'm getting a much better plan that I would if I went out on my own.
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MortgageOnBlack
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Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by MortgageOnBlack »

as9 wrote: Fri Mar 27, 2020 2:02 pm Does your fiance have cash or retirement savings? Income? Other than splitting housing costs have you figured out how you'll be managing your finances together?

It's hard to give any advice here without the complete picture unless you've decided to keep your finances entirely separate from one another.
Fiancee is a teacher with her own retirement plan that she contributes to. My fiancee is frugal, but I'm more on the extreme end.

We have discussed this and our finances will always remain separated. We may increase our shared amount we contribute (currently at $1200 each) overtime as things come up (sudden shared expenses, new house, or children). The shared amount gets transferred into our joint checking account every month, but we each maintain our own personal checking accounts.

We both prefer this because there is no guilt with making personal purchases. I have seen people operate on the opposite end of the spectrum (combining 100% of everything) and it isn't my cup of tea. My brother got reprimanded by his wife (now ex) for eating McDonald's for lunch once. She also had no problem spending "their money" on items which weren't important to him. I'm pretty happy with my situation.
Last edited by MortgageOnBlack on Fri Mar 27, 2020 2:15 pm, edited 1 time in total.
Makefile
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Joined: Fri Apr 22, 2016 11:03 pm

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by Makefile »

MortgageOnBlack wrote: Fri Mar 27, 2020 2:08 pm Fiancee is a teacher with her own retirement plan that she contributes to. My fiancee is frugal, but I'm more on the extreme end.

We have discussed this and our finances will always remain separated. We may increase our shared amount we contribute (currently at $1200 each) overtime as things come up (sudden shared expenses, new house, or children). The shared amount gets transferred into our joint checking account every month.
That's ok, although once married you'll have to see if you can get on her health insurance as I suspect it may be better than yours.
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MortgageOnBlack
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Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by MortgageOnBlack »

Makefile wrote: Fri Mar 27, 2020 2:14 pm
MortgageOnBlack wrote: Fri Mar 27, 2020 2:08 pm Fiancee is a teacher with her own retirement plan that she contributes to. My fiancee is frugal, but I'm more on the extreme end.

We have discussed this and our finances will always remain separated. We may increase our shared amount we contribute (currently at $1200 each) overtime as things come up (sudden shared expenses, new house, or children). The shared amount gets transferred into our joint checking account every month.
That's ok, although once married you'll have to see if you can get on her health insurance as I suspect it may be better than yours.
Yes, I am looking forward to this once we get married:
1) Merging car insurance
2) Merging Health care insurance

I'm not sure if anything else will offer savings once we are married. I don't think home insurance would change, but I might be wrong.
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geerhardusvos
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Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by geerhardusvos »

MortgageOnBlack wrote: Fri Mar 27, 2020 1:46 pm Please critique my Savings Rate. I appreciate as many opinions as possible.

Age: 36 years old
Status: Engaged, Soon to be Married
Kids: None, but soon (1-2)? (fiancee is 7 years younger than me)
Current Gross Earnings: $74,000 ($6,166.66 a month)
Current After-Tax Earnings: $54,288 ($4,524 a month)

Total Emergency Fund: $50,000 (This is used for Emergencies or Investment Oppurtunities)
Ally Bank CD = $40,000
I-Bonds = $10,000

Total Debt: $211,000
Mortgage: $211,000 (20 years remaining, 3.375%). This amount (as well as Escrow, Utilities, and Maintenance) is split 50/50 with Fiancee. We pay the minimum every month, no extra prinicipal.

Total Current Retirement Portfolio: ~$100,000
Rollover IRA (Traditional) = $65,000
100% in Vanguard LifeStrategy Growth Fund (80/20)

Roth IRA = $35,000
100% Vanguard LifeStrategy Growth Fund (80/20)

Strategy the past 5 years:
Maxing out ROTH ($500 per month DCA). Increase Savings until I reach $50,000 in Emergency Fund.

Proposed Strategy:
Now that I've reached $50,000 in my Emergency Fund, I plan on investing in my Taxable Vanguard Brokerage account (VTSAX and VTIAX). I'm not sure what amount I would like to contribute and could use some help finding a balance.

Here is a breakdown of all my monthly expenses:

HOUSING,UTILITIES,SHARED EXPENSES: $1200 (my fiancee' matches this amount as well for the house)
CELLPHONE: $25
CAR - GAS: $80
CAR - INSURANCE: $80
CAR - MAINTENANCE: $80
FOOD/GROCERIES: $300
ENTERTAINMENT/BEER/DINING OUT: $100
TOTAL EXPENSES: $1865

MONEY LEFT-OVER FOR SAVING/INVESTING/SPENDING: $2,659
ROTH: -$500

After my Roth contribution, I have $2,159 left-over. How much should I commit to investing every month? I don't have access to any other retirement accounts (just a ROTH/Traditional IRA so all extra investing will need to be done in Taxable). I am considering using some of the left-over money to replace my car and/or fun/travel, but I'm not sure how much is too much. Also, I'm not sure how much to plan for children. I would like to put together a Savings Rate that I can stick with it for the long-haul and would like to start this on May 1st. Any input?
Saving rate looks pretty good, keep it up. Check out this order of operations. Bogleheads has one too I think https://forum.mrmoneymustache.com/inves ... msg1333153
VTSAX and chill
as9
Posts: 206
Joined: Mon Jan 27, 2020 9:26 am

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by as9 »

MortgageOnBlack wrote: Fri Mar 27, 2020 2:08 pm
as9 wrote: Fri Mar 27, 2020 2:02 pm Does your fiance have cash or retirement savings? Income? Other than splitting housing costs have you figured out how you'll be managing your finances together?

It's hard to give any advice here without the complete picture unless you've decided to keep your finances entirely separate from one another.
Fiancee is a teacher with her own retirement plan that she contributes to. My fiancee is frugal, but I'm more on the extreme end.

We have discussed this and our finances will always remain separated. We may increase our shared amount we contribute (currently at $1200 each) overtime as things come up (sudden shared expenses, new house, or children). The shared amount gets transferred into our joint checking account every month, but we each maintain our own personal checking accounts.

We both prefer this because there is no guilt with making personal purchases. I have seen people operate on the opposite end of the spectrum (combining 100% of everything) and it isn't my cup of tea. My brother got reprimanded by his wife (now ex) for eating McDonald's for lunch once. She also had no problem spending "their money" on items which weren't important to him. I'm pretty happy with my situation.
Ok, the main reason I asked is because if you're out of tax advantaged space and she has more room there (e.g. doesn't do Roth contributions now or could add more to state retirement plan) then that would be preferable to putting all of the surplus in taxable. I'm not sure if that's an option though if you're keeping things separate.
grog
Posts: 567
Joined: Sat Jul 20, 2013 1:09 pm

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by grog »

2,659 saved per month on 74,000 is 43% of gross. That is a very solid savings rate. I would consider anything over 25% to be a pretty high rate. And in terms of dollars, 30K saved per year should leave you with a good nest egg.

Just a thought: Since you don't have a 401K right now, you might want to look at a traditional IRA. Your contribution might be deductible, i.e., it would reduce your AGI by 6K.
Katietsu
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Joined: Sun Sep 22, 2013 1:48 am

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by Katietsu »

I would consider replacing a car with reliable basic transportation to be in a different category than either retirement or fun/travel.

I would want a minimum of 15% to go towards retirement, including the Roth contribution. Personally, I would be aiming more for at least 20% right now while you have no kids or out of ordinary expenses. I would also be aggressively saving for a car since I personally hate debt. But with the low interest rates for the foreseeable future, I could see others choosing differently.

So, maybe $1250 into Roth and other long term savings, $500 into a car fund, and rest for discretionary spending?



There are some people that manage to maintain the separate finances thing even with house purchases and having children. I would personally find it challenging. I would consider switching it around down the road. You and your then wife combine finances but you each get an amount each month to spend or save as you wish.
BrownEyedGirl_27
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Joined: Tue Dec 17, 2019 6:37 pm

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by BrownEyedGirl_27 »

Katietsu wrote: Fri Mar 27, 2020 4:02 pm I would consider replacing a car with reliable basic transportation to be in a different category than either retirement or fun/travel.

I would want a minimum of 15% to go towards retirement, including the Roth contribution. Personally, I would be aiming more for at least 20% right now while you have no kids or out of ordinary expenses. I would also be aggressively saving for a car since I personally hate debt. But with the low interest rates for the foreseeable future, I could see others choosing differently.

So, maybe $1250 into Roth and other long term savings, $500 into a car fund, and rest for discretionary spending?



There are some people that manage to maintain the separate finances thing even with house purchases and having children. I would personally find it challenging. I would consider switching it around down the road. You and your then wife combine finances but you each get an amount each month to spend or save as you wish.
It’s a lot easier to keep finances in joint accounts because you’ll get a better sense of how money is being spent and if there are any changes you need to make to achieve your goals faster. We come from traditional families that always combine finances and that may not be for you, but we just budget “fun money” each month for both of us. With the uncertainty of the next few months with my job, I am cutting nearly all my discretionary spending until I can get a better paying job and save as much as I can. I am ok with my husband spending a small amount on entertainment or his computer-building fund though because he is making the majority of our income.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
Kaizen Soze
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Joined: Thu Apr 11, 2019 1:47 pm

Re: Please critique my Savings Rate... 36yo, Engaged, No Kids

Post by Kaizen Soze »

You have a great savings rate. Your monthly expenses may be missing some non-reoccurring expenses such as travel, shopping, health, gifts/donations.

If you are planning on getting married and having a child within the next 1-2yrs you may want to consider getting life insurance sooner rather than later as premiums go up with age.

As others have mentioned, contributing to an HSA would be a good step.
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