Where should we cut back saving/investing?

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Topic Author
daheld
Posts: 622
Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Where should we cut back saving/investing?

Post by daheld » Wed Sep 11, 2019 2:02 pm

After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
Last edited by daheld on Wed Sep 11, 2019 2:20 pm, edited 3 times in total.

tbone555
Posts: 53
Joined: Thu Apr 13, 2017 1:28 pm

Re: Where should we cut back saving/investing?

Post by tbone555 » Wed Sep 11, 2019 2:17 pm

You are doing great. I think maxing tax-advantaged accounts before 529 and taxable makes sense. Unless you also need to save for something in the near future like a new roof.

Also. I believe you are in the 22% bracket not 24%?

Topic Author
daheld
Posts: 622
Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Wed Sep 11, 2019 2:22 pm

tbone555 wrote:
Wed Sep 11, 2019 2:17 pm
You are doing great. I think maxing tax-advantaged accounts before 529 and taxable makes sense. Unless you also need to save for something in the near future like a new roof.

Also. I believe you are in the 22% bracket not 24%?
You're correct. OP edited to reflect this, as well as our ages.

Thanks for your input. We don't have any huge purchased planned, and have about 6 months in emergency fund. We have some projects around the house as well as some upcoming travel that will be relatively significant expenses, but we expect to be able to pay these from savings.

MathWizard
Posts: 3508
Joined: Tue Jul 26, 2011 1:35 pm

Re: Where should we cut back saving/investing?

Post by MathWizard » Wed Sep 11, 2019 2:23 pm

You are doing fantastic.

Yes, invest in tax advantaged before taxable, and a mix of ROTH and tax-deferred, which you have.

Congrats on the baby.

bloom2708
Posts: 6675
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Location: Fargo, ND

Re: Where should we cut back saving/investing?

Post by bloom2708 » Wed Sep 11, 2019 2:24 pm

Switching to pre-tax in the 401k will give your paycheck a boost. Do the $19k each. Match doesn't count.

I would do the 529 before taxable. But I would only do 529 if you can max 401k/TSP and Roth for each. Which you are doing. Cut both 529 and taxable if you are still light.

Always a good time to look at the spending side too. Cut un-needed monthly bills. Cut your cell phone bill. Cut your TV/Cable bill down. Gym memberships? With kids those start to be hard to use. The best way to understand spending is to track with a tool like Personal Capital or Mint.

Everything is on the table spending wise.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

Topic Author
daheld
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Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Wed Sep 11, 2019 2:34 pm

bloom2708 wrote:
Wed Sep 11, 2019 2:24 pm
Switching to pre-tax in the 401k will give your paycheck a boost. Do the $19k each. Match doesn't count.

I would do the 529 before taxable. But I would only do 529 if you can max 401k/TSP and Roth for each. Which you are doing. Cut both 529 and taxable if you are still light.

Always a good time to look at the spending side too. Cut un-needed monthly bills. Cut your cell phone bill. Cut your TV/Cable bill down. Gym memberships? With kids those start to be hard to use. The best way to understand spending is to track with a tool like Personal Capital or Mint.

Everything is on the table spending wise.
We do track expenses, though admittedly this has become more difficult with a little one. We do it manually by logging expenses in an Excel spreadsheet. Every couple months it takes us an hour or so to do. We don't like the idea of giving banking info/passwords to third parties (yes, I understand it's not more of a risk than other things we do; it's a psychological thing and we're likely to stick with the manual process). We spend $100/month on TV/internet, which is about as low as I can get it without totally dropping TV, which I'm not willing to do. Phone bill is also very cheap as we're on a family plan with my in-laws. Gym membership is $30/ month for both of us.

I'm not saying we can't trim expenses; we absolutely can. I guess what I'm saying is we're saving a TON of money on a relatively normal income and don't spend in a way that's what I'd call excessive. I'm comfortable with our expenses. If it gets to a point that we're not able to max TSP/401ks/Roths, then I will change my tune. :)

Thanks for your help!

SantaClaraSurfer
Posts: 54
Joined: Tue Feb 19, 2019 11:09 am

Re: Where should we cut back saving/investing?

Post by SantaClaraSurfer » Wed Sep 11, 2019 4:57 pm

We pay a small amount per year to run Good Budget app jointly on our phones/laptops. It does NOT connect to our bank account.

Once per month ahead of our monthly budget we reconcile the excel file from the bank and our Good Budget data to check for missing items. (We really would not have to do this, tbh, as the only thing we miss are small items and it would come out in the budget wash, but c'est la vie.)

It works for us along the same lines as what you're discussing above. And we are on the other end of the process with two late teenagers college bound.

People say budgeting doesn't make a whole lot of difference, in some ways, especially if your needs are basically met. Perhaps they are right. I also think it makes all the difference. But I'm biased.

Bottom line, either you are comfortable investing time and effort in a system where you save $15 on a grocery visit and somehow that lives in the same accounting framework as splurging $240 on a vacation night out dinner, or you're not.

My view is that keeping a budget is what allows us to do all those crazy things we can't believe we get a chance to do + support our kids and our values + save and invest to do more crazy things!!

Topic Author
daheld
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Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 7:20 am

SantaClaraSurfer wrote:
Wed Sep 11, 2019 4:57 pm
We pay a small amount per year to run Good Budget app jointly on our phones/laptops. It does NOT connect to our bank account.

Once per month ahead of our monthly budget we reconcile the excel file from the bank and our Good Budget data to check for missing items. (We really would not have to do this, tbh, as the only thing we miss are small items and it would come out in the budget wash, but c'est la vie.)

It works for us along the same lines as what you're discussing above. And we are on the other end of the process with two late teenagers college bound.

People say budgeting doesn't make a whole lot of difference, in some ways, especially if your needs are basically met. Perhaps they are right. I also think it makes all the difference. But I'm biased.

Bottom line, either you are comfortable investing time and effort in a system where you save $15 on a grocery visit and somehow that lives in the same accounting framework as splurging $240 on a vacation night out dinner, or you're not.

My view is that keeping a budget is what allows us to do all those crazy things we can't believe we get a chance to do + support our kids and our values + save and invest to do more crazy things!!
My wife is way smarter than me and created a fancy Excel spreadsheet with tables and all kinds of stuff that I have no idea how to do. We do essentially the same thing. Download transactions, go down the list and categorize them by typing in what expense category each expense falls under, and all the data is compiled on a single page that tells us how much we spent cumulatively.

We do this regularly, but we don't obsess over everything. We think of it more of a check on ourselves than trying to adhere strictly to a budget.

stan1
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Re: Where should we cut back saving/investing?

Post by stan1 » Thu Sep 12, 2019 7:34 am

You are saving a lot even with the reductions you propose (about 30% of gross). Maybe there's a few more expenses you could look at but I'd also focus on the income side at your ages. Anything you could do on that front (of course balanced with quality of life considerations)? Are you lined up to be competitive for promotions or do you need to take any actions to beef up the skills and experience bullets on your resume? Do you need to shop your resume out and see if there's a new opportunity? Agree with going all Traditional 401K/TSP at this time to help get more into 529.

sjt
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Location: NC

Re: Where should we cut back saving/investing?

Post by sjt » Thu Sep 12, 2019 7:43 am

daheld wrote:
Thu Sep 12, 2019 7:20 am
SantaClaraSurfer wrote:
Wed Sep 11, 2019 4:57 pm
We pay a small amount per year to run Good Budget app jointly on our phones/laptops. It does NOT connect to our bank account.


We do this regularly, but we don't obsess over everything. We think of it more of a check on ourselves than trying to adhere strictly to a budget.
We run Goodbudget app on phones - it allows us both to use the same login and track expenses together in different categories and we don't pay anything. We have 9 envelopes / categories. You might need to pay if you want more envelopes.

Anyway, we just enter the amount off the receipt every time we make a purchase. Pretty quick and you don't need to worry about taking time out of your schedule to go back through months of expenses.
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

cherijoh
Posts: 6283
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Where should we cut back saving/investing?

Post by cherijoh » Thu Sep 12, 2019 7:44 am

daheld wrote:
Wed Sep 11, 2019 2:02 pm
After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
You have gotten good advice upstream about which order to trim savings if necessary. I want to take this opportunity to remind you (if you haven't already done so) to review your insuarance (life & disability) and get/update wills to reflect the fact that you are now parents.

Topic Author
daheld
Posts: 622
Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 7:47 am

stan1 wrote:
Thu Sep 12, 2019 7:34 am
You are saving a lot even with the reductions you propose (about 30% of gross). Maybe there's a few more expenses you could look at but I'd also focus on the income side at your ages. Anything you could do on that front? Are you lined up to be competitive for promotions or do you need to take any actions to beef up the skills and experience bullets on your resume? Do you need to shop your resume out and see if there's a new opportunity? Agree with going all Traditional 401K/TSP at this time to help get more into 529.
I'm a federal employee and do not plan on leaving. For my line of work, the pay is good. I realize it's not much compared to most folks around here, but it's more than I expected to make and I'll have a pension if I'm able to retire as a fed. My wife has more potential to have a much higher income at some point, though she has had some relatively serious health complications and is only 35. She has a chronic disease that will not go away and could worsen considerably at some point. We are planning (financially and generally) for her to retire at 55. If that happens, great. If she wants to work longer, great. If she gets sick and is unable to work, our saving aggressively will pay off. For all of these reasons, I don't intend on pushing the issue of her trying to make a lot more money. We save a lot right now, intend to keep saving, and don't really have any unmet needs.

We live in a relatively LCOL area in the midwest. Purchased a 2200SF home a year and a half ago for $294k and put a large down payment down--we currently owe ~$185k and plan to have it paid off in 20 years total.

IF our plan works out, we will have the house paid off at the same time our son will be graduating high school and my wife will be 55.

Topic Author
daheld
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Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 7:49 am

cherijoh wrote:
Thu Sep 12, 2019 7:44 am
daheld wrote:
Wed Sep 11, 2019 2:02 pm
After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
You have gotten good advice upstream about which order to trim savings if necessary. I want to take this opportunity to remind you (if you haven't already done so) to review your insuarance (life & disability) and get/update wills to reflect the fact that you are now parents.
Because of my wife's previous health issues, there is zero chance she'd ever qualify for life insurance. I am healthy and purchased a 20 year term life insurance policy at 10x my salary a few months before the baby was born. Within a month of him being born, we had our wills/POAs finalized with an attorney.

Topic Author
daheld
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Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 7:50 am

sjt wrote:
Thu Sep 12, 2019 7:43 am
daheld wrote:
Thu Sep 12, 2019 7:20 am
SantaClaraSurfer wrote:
Wed Sep 11, 2019 4:57 pm
We pay a small amount per year to run Good Budget app jointly on our phones/laptops. It does NOT connect to our bank account.


We do this regularly, but we don't obsess over everything. We think of it more of a check on ourselves than trying to adhere strictly to a budget.
We run Goodbudget app on phones - it allows us both to use the same login and track expenses together in different categories and we don't pay anything. We have 9 envelopes / categories. You might need to pay if you want more envelopes.

Anyway, we just enter the amount off the receipt every time we make a purchase. Pretty quick and you don't need to worry about taking time out of your schedule to go back through months of expenses.
I will look into Goodbudget. I'm not sure we'd be very good about keeping up with it in real time, but I love the idea of not having to sit down every couple months. Although I will say that it really doesn't take that much time, and my wife put a lot of work into creating the spreadsheet. :D

soccerrules
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Re: Where should we cut back saving/investing?

Post by soccerrules » Thu Sep 12, 2019 8:02 am

quick comments
if you need to reduce savings -- 529 1st and then taxable
next is looking for ways to increase income-- look for growth oppty's at current fed employment (add skills on the side to improve options) .
Side Gig ? Do you have a skill or hobby that could bring in extra money ? just $300 a month adds cushion and gives you a little more flexibility.

either increase income or reduce expenses -- or both. Pretty simple formula, but hard to do.
In general you appear to be in a really good spot and probably better than 95% of the people you know. Stay the course.

Don't get discouraged reading the posts on BH as this a very unique group of people and many of us were no where close to where you are in our 30's.
Don't let your outflow exceed your income or your upkeep will be your downfall.

Topic Author
daheld
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Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 8:25 am

soccerrules wrote:
Thu Sep 12, 2019 8:02 am
quick comments
if you need to reduce savings -- 529 1st and then taxable
next is looking for ways to increase income-- look for growth oppty's at current fed employment (add skills on the side to improve options) .
Side Gig ? Do you have a skill or hobby that could bring in extra money ? just $300 a month adds cushion and gives you a little more flexibility.

either increase income or reduce expenses -- or both. Pretty simple formula, but hard to do.
In general you appear to be in a really good spot and probably better than 95% of the people you know. Stay the course.

Don't get discouraged reading the posts on BH as this a very unique group of people and many of us were no where close to where you are in our 30's.
Thanks for your feedback! We may have the opportunity to increase income through promotions--I've explained in more detail above. I would be interested in a side gig (I actually did have one until a year or so ago) and will explore more options.

I'm not discouraged. My folks never made much money but they saved and saved. We luckily live somewhere that's not terribly expensive and we still have the opportunity to get ahead.

cherijoh
Posts: 6283
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Where should we cut back saving/investing?

Post by cherijoh » Thu Sep 12, 2019 8:25 am

daheld wrote:
Thu Sep 12, 2019 7:49 am
cherijoh wrote:
Thu Sep 12, 2019 7:44 am
daheld wrote:
Wed Sep 11, 2019 2:02 pm
After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
You have gotten good advice upstream about which order to trim savings if necessary. I want to take this opportunity to remind you (if you haven't already done so) to review your insuarance (life & disability) and get/update wills to reflect the fact that you are now parents.
Because of my wife's previous health issues, there is zero chance she'd ever qualify for life insurance. I am healthy and purchased a 20 year term life insurance policy at 10x my salary a few months before the baby was born. Within a month of him being born, we had our wills/POAs finalized with an attorney.
Sounds like you have things under control then.

Does your wife have a group life insurance plan through work? I know my father would never had qualified for private life insurance due to health issues, but he was able to get some life insurance without a medical exam through his employer. (If he had tried to bump to up to a high multiple of salary a medical exam would have been required).

Topic Author
daheld
Posts: 622
Joined: Wed Sep 13, 2017 8:14 am
Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 8:28 am

cherijoh wrote:
Thu Sep 12, 2019 8:25 am
daheld wrote:
Thu Sep 12, 2019 7:49 am
cherijoh wrote:
Thu Sep 12, 2019 7:44 am
daheld wrote:
Wed Sep 11, 2019 2:02 pm
After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
You have gotten good advice upstream about which order to trim savings if necessary. I want to take this opportunity to remind you (if you haven't already done so) to review your insuarance (life & disability) and get/update wills to reflect the fact that you are now parents.
Because of my wife's previous health issues, there is zero chance she'd ever qualify for life insurance. I am healthy and purchased a 20 year term life insurance policy at 10x my salary a few months before the baby was born. Within a month of him being born, we had our wills/POAs finalized with an attorney.
Sounds like you have things under control then.

Does your wife have a group life insurance plan through work? I know my father would never had qualified for private life insurance due to health issues, but he was able to get some life insurance without a medical exam through his employer. (If he had tried to bump to up to a high multiple of salary a medical exam would have been required).
She does. It's not a terribly high amount of coverage, but it's better than nothing. If I remember correctly it's roughly 2x annual salary. Her health concerns are sort of taken into account in terms of our overall strategy too--we're probably saving more aggressively than I'd be concerned with if she were otherwise healthy, our AA is slightly more conservative because of these concerns, and we plan to pay off our house early and target an early retirement for her. All, some, or none of these things may work out. :P

soccerrules
Posts: 890
Joined: Mon Nov 14, 2016 4:01 pm

Re: Where should we cut back saving/investing?

Post by soccerrules » Thu Sep 12, 2019 10:56 am

daheld wrote:
Thu Sep 12, 2019 8:25 am
soccerrules wrote:
Thu Sep 12, 2019 8:02 am
quick comments
if you need to reduce savings -- 529 1st and then taxable
next is looking for ways to increase income-- look for growth oppty's at current fed employment (add skills on the side to improve options) .
Side Gig ? Do you have a skill or hobby that could bring in extra money ? just $300 a month adds cushion and gives you a little more flexibility.

either increase income or reduce expenses -- or both. Pretty simple formula, but hard to do.
In general you appear to be in a really good spot and probably better than 95% of the people you know. Stay the course.

Don't get discouraged reading the posts on BH as this a very unique group of people and many of us were no where close to where you are in our 30's.
Thanks for your feedback! We may have the opportunity to increase income through promotions--I've explained in more detail above. I would be interested in a side gig (I actually did have one until a year or so ago) and will explore more options.

I'm not discouraged. My folks never made much money but they saved and saved. We luckily live somewhere that's not terribly expensive and we still have the opportunity to get ahead.
Great job. It really is simple. LBYM- Save and Invest and then let Compound Interest do it's job.
Your 55 year old self will thank you one day. :beer
Don't let your outflow exceed your income or your upkeep will be your downfall.

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abuss368
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Re: Where should we cut back saving/investing?

Post by abuss368 » Thu Sep 12, 2019 11:09 am

There is an old saying, and for good measure, one can finance college but can not finance retirement.

Reducing the 529 contributions for the time seems reasonable.
John C. Bogle: "Simplicity is the master key to financial success."

Topic Author
daheld
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Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 11:18 am

soccerrules wrote:
Thu Sep 12, 2019 10:56 am
daheld wrote:
Thu Sep 12, 2019 8:25 am
soccerrules wrote:
Thu Sep 12, 2019 8:02 am
quick comments
if you need to reduce savings -- 529 1st and then taxable
next is looking for ways to increase income-- look for growth oppty's at current fed employment (add skills on the side to improve options) .
Side Gig ? Do you have a skill or hobby that could bring in extra money ? just $300 a month adds cushion and gives you a little more flexibility.

either increase income or reduce expenses -- or both. Pretty simple formula, but hard to do.
In general you appear to be in a really good spot and probably better than 95% of the people you know. Stay the course.

Don't get discouraged reading the posts on BH as this a very unique group of people and many of us were no where close to where you are in our 30's.
Thanks for your feedback! We may have the opportunity to increase income through promotions--I've explained in more detail above. I would be interested in a side gig (I actually did have one until a year or so ago) and will explore more options.

I'm not discouraged. My folks never made much money but they saved and saved. We luckily live somewhere that's not terribly expensive and we still have the opportunity to get ahead.
Great job. It really is simple. LBYM- Save and Invest and then let Compound Interest do it's job.
Your 55 year old self will thank you one day. :beer
It is certainly not a difficult equation theoretically, and I am super fortunate to have parents who taught me to save. I do look at folks living in HCOL areas and wonder how they make it work. We do not make a ton of money but living in a place where you can get by on a decent income instead of having to make an asinine amount of money makes such a huge difference. And, here's the thing--we make more than anyone I ever knew growing up. Context matters.

cherijoh
Posts: 6283
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Where should we cut back saving/investing?

Post by cherijoh » Thu Sep 12, 2019 2:21 pm

daheld wrote:
Thu Sep 12, 2019 11:18 am
soccerrules wrote:
Thu Sep 12, 2019 10:56 am
daheld wrote:
Thu Sep 12, 2019 8:25 am
Thanks for your feedback! We may have the opportunity to increase income through promotions--I've explained in more detail above. I would be interested in a side gig (I actually did have one until a year or so ago) and will explore more options.

I'm not discouraged. My folks never made much money but they saved and saved. We luckily live somewhere that's not terribly expensive and we still have the opportunity to get ahead.
Great job. It really is simple. LBYM- Save and Invest and then let Compound Interest do it's job.
Your 55 year old self will thank you one day. :beer
It is certainly not a difficult equation theoretically, and I am super fortunate to have parents who taught me to save. I do look at folks living in HCOL areas and wonder how they make it work. We do not make a ton of money but living in a place where you can get by on a decent income instead of having to make an asinine amount of money makes such a huge difference. And, here's the thing--we make more than anyone I ever knew growing up. Context matters.
I have a neighbor who was really excited (and a little bit smug) about her husband's promotion and transfer until they went house hunting in CA and realized their standard of living and quality of life (e.g., much longer commute) would be a lot worse. A couple of years later they were back in Charlotte and had moved back in our neighborhood into a smaller house than they had had previously.

Topic Author
daheld
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Location: STL

Re: Where should we cut back saving/investing?

Post by daheld » Thu Sep 12, 2019 2:28 pm

cherijoh wrote:
Thu Sep 12, 2019 2:21 pm
daheld wrote:
Thu Sep 12, 2019 11:18 am
soccerrules wrote:
Thu Sep 12, 2019 10:56 am
daheld wrote:
Thu Sep 12, 2019 8:25 am
Thanks for your feedback! We may have the opportunity to increase income through promotions--I've explained in more detail above. I would be interested in a side gig (I actually did have one until a year or so ago) and will explore more options.

I'm not discouraged. My folks never made much money but they saved and saved. We luckily live somewhere that's not terribly expensive and we still have the opportunity to get ahead.
Great job. It really is simple. LBYM- Save and Invest and then let Compound Interest do it's job.
Your 55 year old self will thank you one day. :beer
It is certainly not a difficult equation theoretically, and I am super fortunate to have parents who taught me to save. I do look at folks living in HCOL areas and wonder how they make it work. We do not make a ton of money but living in a place where you can get by on a decent income instead of having to make an asinine amount of money makes such a huge difference. And, here's the thing--we make more than anyone I ever knew growing up. Context matters.
I have a neighbor who was really excited (and a little bit smug) about her husband's promotion and transfer until they went house hunting in CA and realized their standard of living and quality of life (e.g., much longer commute) would be a lot worse. A couple of years later they were back in Charlotte and had moved back in our neighborhood into a smaller house than they had had previously.
Some of our friends moved to our midwest city a year or two ago after spending a decade or so living in Boston, LA and San Fran for undergrad, grad school and academia jobs. They were initially hesitant for personal reasons, but I know that after two years, being able to afford a nice home in the best school district in the state combined with improved quality of life in terms of commuting, etc., they are thrilled that they made the move. They also make a pretty normal income that had them stretched to the max elsewhere.

Pudge
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Re: Where should we cut back saving/investing?

Post by Pudge » Thu Sep 12, 2019 8:48 pm

Instead of thinking about where to cut expenses, start thinking more about what you can do to increase your income. Not by working longer hours, but by working smarter, not harder. Smarter, more strategic, more focused, more goal-oriented.

Secondly, the idea that you are going to increase your income through "job promotions", isn't really a strategy. Unless you have a definitive time frame with a definite position in mind, then this isn't really an income strategy. Meaning, if you say, "Within 24 months, I will hold the position of Sr. Manager Supervisor reporting to XYZ Department with an increased income of X dollars per year", then you have a more tangible goal in mind. It's easy to drift. Start to think about specific goal-setting to increase your income. The write the goal on paper, give it a deadline, and take action to get there.

Secondly, don't plan on the pension. If it is there when you retire, fine. Pensions are going bust all over the country, and it will only get worse. The federal government is broke. You have a very long time horizon ahead of you, so don't plan on a pension being there when you retire. You need a back-up plan.

When you say, "For my line of work, the pay is good." What does that mean exactly? If I were the highest paid ditch digger, that wouldn't be my end goal (Nothing against ditch diggers, by the way). Start thinking less about the job itself, or the line of work, and think about your unique talents and skill sets and how those skills can be parlayed into more income. If you are a budget analyst, for example, perhaps you can take those exact same budget analytical skills to work in a different capacity, even doubling your income in the process.

7eight9
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Re: Where should we cut back saving/investing?

Post by 7eight9 » Thu Sep 12, 2019 9:04 pm

One thing you might want to do (if you aren't doing it already) is chase credit card bonuses. You likely have a variety of expenses that you can charge. Some may be large enough to get part of the way to the bonus spend without doing anything additional (i.e. semi-annual car insurance). If you don't have the organic spend to qualify for the bonus within the applicable time period you could always buy grocery store gift cards, etc. to get there. Basically it is picking up free money for spend that you are going to do anyway. Or you could jump into the deep end of the pool and explore MS. And of course bank bonuses and brokerage bonuses if you want to play the game a bit more. Just an idea. Best of luck.
I guess it all could be much worse. | They could be warming up my hearse.

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Fri Sep 13, 2019 7:32 am

Pudge wrote:
Thu Sep 12, 2019 8:48 pm
Unless you have a definitive time frame with a definite position in mind, then this isn't really an income strategy.
I do.
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
Secondly, don't plan on the pension. If it is there when you retire, fine. Pensions are going bust all over the country, and it will only get worse. The federal government is broke. You have a very long time horizon ahead of you, so don't plan on a pension being there when you retire. You need a back-up plan.
I'm not planning ON the pension, but it would be silly to not consider it. It is the most guaranteed pension/retirement benefit possible. That doesn't mean it's guaranteed, but I'm for sure going to consider the fact that it will in all likelihood be there.
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
When you say, "For my line of work, the pay is good." What does that mean exactly? If I were the highest paid ditch digger, that wouldn't be my end goal (Nothing against ditch diggers, by the way). Start thinking less about the job itself, or the line of work, and think about your unique talents and skill sets and how those skills can be parlayed into more income. If you are a budget analyst, for example, perhaps you can take those exact same budget analytical skills to work in a different capacity, even doubling your income in the process.
This means exactly what it sounds like it means. For my line of work, the pay is good. Look, I make about half our household gross income. You can do the math. It's not a ton of money, but it's enough. It's also nearly what my parents made combined at their highest earning phase. My wife and I are in good shape financially. We have zero debt. We have about 4x our gross income stacked away for retirement in our mid 30s. Our home is 1/3 of the way paid off and will be paid off 10 years early. I am not interested in killing myself for a title when I am content and happy. And on the way to being financially independent and retired in my mid 50s.

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Fri Sep 13, 2019 7:36 am

7eight9 wrote:
Thu Sep 12, 2019 9:04 pm
One thing you might want to do (if you aren't doing it already) is chase credit card bonuses. You likely have a variety of expenses that you can charge. Some may be large enough to get part of the way to the bonus spend without doing anything additional (i.e. semi-annual car insurance). If you don't have the organic spend to qualify for the bonus within the applicable time period you could always buy grocery store gift cards, etc. to get there. Basically it is picking up free money for spend that you are going to do anyway. Or you could jump into the deep end of the pool and explore MS. And of course bank bonuses and brokerage bonuses if you want to play the game a bit more. Just an idea. Best of luck.
This is good advice. We both have rewards cards, though admittedly not ones with really great rewards systems. We'll explore this option more thoroughly. I will give my wife some credit here--when we first married I was very averse to using credit cards (just mostly as a result of being conditioned by my very financially conservative parents). My wife had been using cards for rewards for years, as you say just buying things she had to have and would buy anyway. We do use the cards for stuff we need, but we could get cards with better rewards.

NotWhoYouThink
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Re: Where should we cut back saving/investing?

Post by NotWhoYouThink » Fri Sep 13, 2019 8:19 am

A few maybe contrarian thoughts about 529s and possible tax arbitrage.

To be sure, there is the possibility that you will not need this - your child will skip college, or get an appointment to West Point, or get a full athletic scholarship, or there will be a total revolution in college funding in the next 17 years.

But just in case you need to save for college, now is a good time for 529 contributions. It's true that you don't get to deduct 529 contributions on federal taxes (although you may be able to deduct them from state taxes), but your tax rate is probably lower now than it will be when your child goes to college. Frequent advice on this forum is to cash flow college when the time comes, even if it means forgoing deductible 401k contributions during those years. But those are likely to be your highest earning/highest tax rate years, when giving up those tax deductions will cost you the most.

So it might make sense to contribute a fair amount to a 529 now, get the full advantage of 18-20 years of tax free growth, and not have to consider slowing down your 401k contributions at the time they are worth the most to you.

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Fri Sep 13, 2019 8:22 am

NotWhoYouThink wrote:
Fri Sep 13, 2019 8:19 am
A few maybe contrarian thoughts about 529s and possible tax arbitrage.

To be sure, there is the possibility that you will not need this - your child will skip college, or get an appointment to West Point, or get a full athletic scholarship, or there will be a total revolution in college funding in the next 17 years.

But just in case you need to save for college, now is a good time for 529 contributions. It's true that you don't get to deduct 529 contributions on federal taxes (although you may be able to deduct them from state taxes), but your tax rate is probably lower now than it will be when your child goes to college. Frequent advice on this forum is to cash flow college when the time comes, even if it means forgoing deductible 401k contributions during those years. But those are likely to be your highest earning/highest tax rate years, when giving up those tax deductions will cost you the most.

So it might make sense to contribute a fair amount to a 529 now, get the full advantage of 18-20 years of tax free growth, and not have to consider slowing down your 401k contributions at the time they are worth the most to you.
Totally get this advice and I will consider it going forward. One important point is that although we've only been contributing for 8 months or so, we did kick off the 529 account with a $10,000 lump sum contribution.

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dogagility
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Re: Where should we cut back saving/investing?

Post by dogagility » Sat Sep 14, 2019 4:51 am

daheld wrote:
Fri Sep 13, 2019 8:22 am
Totally get this advice and I will consider it going forward. One important point is that although we've only been contributing for 8 months or so, we did kick off the 529 account with a $10,000 lump sum contribution.
Forgive me if I haven't completely internalized your financial situation, but here are some suggestions.

If you haven't already, read the Bogleheads wiki on prioritizing investments. https://www.bogleheads.org/wiki/Priorit ... nvestments

Investing in a 529 is acceptable, so long as you've considered the effect of this investing strategy on your retirement investing goal. Make sure to take advantage of a state tax credit/deduction, if available.

Although you've mentioned potential health issues in your family which may not make financial sense for this advice, consider switching to a high deductible health plan for next year (if available) and then contributing to an HSA. https://www.bogleheads.org/wiki/Health_savings_account
Taking "risk" since 1995.

Pudge
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Re: Where should we cut back saving/investing?

Post by Pudge » Sat Sep 14, 2019 8:22 am

daheld wrote:
Fri Sep 13, 2019 7:32 am
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
Unless you have a definitive time frame with a definite position in mind, then this isn't really an income strategy.
I do.
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
Secondly, don't plan on the pension. If it is there when you retire, fine. Pensions are going bust all over the country, and it will only get worse. The federal government is broke. You have a very long time horizon ahead of you, so don't plan on a pension being there when you retire. You need a back-up plan.
I'm not planning ON the pension, but it would be silly to not consider it. It is the most guaranteed pension/retirement benefit possible. That doesn't mean it's guaranteed, but I'm for sure going to consider the fact that it will in all likelihood be there.
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
When you say, "For my line of work, the pay is good." What does that mean exactly? If I were the highest paid ditch digger, that wouldn't be my end goal (Nothing against ditch diggers, by the way). Start thinking less about the job itself, or the line of work, and think about your unique talents and skill sets and how those skills can be parlayed into more income. If you are a budget analyst, for example, perhaps you can take those exact same budget analytical skills to work in a different capacity, even doubling your income in the process.
This means exactly what it sounds like it means. For my line of work, the pay is good. Look, I make about half our household gross income. You can do the math. It's not a ton of money, but it's enough. It's also nearly what my parents made combined at their highest earning phase. My wife and I are in good shape financially. We have zero debt. We have about 4x our gross income stacked away for retirement in our mid 30s. Our home is 1/3 of the way paid off and will be paid off 10 years early. I am not interested in killing myself for a title when I am content and happy. And on the way to being financially independent and retired in my mid 50s.
If you have already cut expenses to the bone, then start to focus on the income strategy of the equation.

I said work smarter, not harder. You do that by exploring your unique talents and how those can be applied to double and triple your income.

What really unique skills and talents do you have that could be parlayed into income? Get creative and think longer term. Maybe you have great writing skills, and could write a book in your spare time. Maybe you collect stamps, or antique coins, and could turn this collection into a small fortune by the time you retire. Maybe you have great artistic skills or you like to collect antique cars. Just think about all the ways that you can get super creative to double and triple your income.

The market rewards ingenuity, creativity, and rare talents.

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CyclingDuo
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Re: Where should we cut back saving/investing?

Post by CyclingDuo » Sat Sep 14, 2019 10:55 am

daheld wrote:
Wed Sep 11, 2019 2:02 pm
After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
We are parents of the mindset that it is absolutely the duty of parents to provide for their children's education. Imagine that - coming from two parents who currently work in education? :mrgreen:

That duty includes day care, their additional costs during K-12 years (summer camps, field trips, school trips, extra curricular activities, AP courses, etc...) and of course - college tuition/room/board and any potential semester/year abroad study. Your child is 9 months old, so you have a beautiful and clear runway in front of you for the next 18-22 years (perhaps an additional 2 years or so if graduate school is involved) to get that college education fund fueled and ready for take off to launch them into graduating from college completely debt free. The power of time and compounding is on your side for this, so we would leverage it and look to cut out other savings and expenses along the way to accomplish that. You do not want to send your child off into their careers carrying student loan debt, and there is no reason to have to do that with careful planning.

Bada boom! Mic drop! Baby Step 5!

Call it what you want.

It looks like with your income and advantage of living in a LCOL area in the midwest, you will easily be able to do that. We would not stop funding the 529 or any other college education savings (UTMA/UGMA, taxable, etc). There is no need to totally max out all of the retirement plans - seriously! Especially since you will also have a government pension in retirement. It's nice that you have been able to max out your retirement plans leading into the birth of your child, but there is no fast and hard rule that you must max them all out. Plenty of parents (including us) have successfully contributed 15-20% over the life of our careers into retirement funds, as well as funding our children's education to end up with all bases covered and well funded when reaching your mid to late 50's. We never maxed out all of our retirement plans until we hit our mid 50's as funding the age zero to 22-24 years for our kids was a higher priority on the list. (All graduated debt free!)

Set aside $22,500 (15%) of your $150K income for retirement as a minimum, perhaps up to $30,000 (20%) as a minimum. Fund the 529 with a nice chunk of annual money. Then, after that is funded (or if you use a combination of UTMA/UGMA as well) you can go back and add more to your retirement and taxable accounts.

Avoid all debt outside of your mortgage, and keep your expenses low. Sock it away and enjoy raising your child(ren). If you are also both paying into SS, then you will have the traditional three legged stool of income in retirement (pension, SS, risk portfolio).

That's our two cents as parents, educators, and how we funded children's education as well as retirement plans over the past 26 years (when our oldest was born).
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Mon Sep 16, 2019 7:29 am

CyclingDuo wrote:
Sat Sep 14, 2019 10:55 am
daheld wrote:
Wed Sep 11, 2019 2:02 pm
After having a baby about 9 months ago and taking on associated expenses (i.e. daycare), we (ages 33 and 35) are at a point where we're likely going to have to cut back on investing. We are fortunate to be able to invest pretty aggressively but I don't want to cut us too close. Relevant details and questions below:

Income:
~$150k combined; 22% tax bracket
Emergency fund: ~6 months

Investments:
401k/TSP: max both. 401k is all invested all traditional; TSP is 2/3 traditional, 1/3 Roth. I am going to make this all traditional soon.
Roths: max both
Taxable Brokerage: was $250/month. Just reduced this to $100/month.
529: Was $175/month. Just reduced this to $50/month.

As you can see I've reduced the amount invested via taxable and 529.

Questions:
Taxable and 529 are the first I should reduce or stop, correct?
If we need to further reduce investments, in what order should we reduce savings?
We are parents of the mindset that it is absolutely the duty of parents to provide for their children's education. Imagine that - coming from two parents who currently work in education? :mrgreen:

That duty includes day care, their additional costs during K-12 years (summer camps, field trips, school trips, extra curricular activities, AP courses, etc...) and of course - college tuition/room/board and any potential semester/year abroad study. Your child is 9 months old, so you have a beautiful and clear runway in front of you for the next 18-22 years (perhaps an additional 2 years or so if graduate school is involved) to get that college education fund fueled and ready for take off to launch them into graduating from college completely debt free. The power of time and compounding is on your side for this, so we would leverage it and look to cut out other savings and expenses along the way to accomplish that. You do not want to send your child off into their careers carrying student loan debt, and there is no reason to have to do that with careful planning.

Bada boom! Mic drop! Baby Step 5!

Call it what you want.

It looks like with your income and advantage of living in a LCOL area in the midwest, you will easily be able to do that. We would not stop funding the 529 or any other college education savings (UTMA/UGMA, taxable, etc). There is no need to totally max out all of the retirement plans - seriously! Especially since you will also have a government pension in retirement. It's nice that you have been able to max out your retirement plans leading into the birth of your child, but there is no fast and hard rule that you must max them all out. Plenty of parents (including us) have successfully contributed 15-20% over the life of our careers into retirement funds, as well as funding our children's education to end up with all bases covered and well funded when reaching your mid to late 50's. We never maxed out all of our retirement plans until we hit our mid 50's as funding the age zero to 22-24 years for our kids was a higher priority on the list. (All graduated debt free!)

Set aside $22,500 (15%) of your $150K income for retirement as a minimum, perhaps up to $30,000 (20%) as a minimum. Fund the 529 with a nice chunk of annual money. Then, after that is funded (or if you use a combination of UTMA/UGMA as well) you can go back and add more to your retirement and taxable accounts.

Avoid all debt outside of your mortgage, and keep your expenses low. Sock it away and enjoy raising your child(ren). If you are also both paying into SS, then you will have the traditional three legged stool of income in retirement (pension, SS, risk portfolio).

That's our two cents as parents, educators, and how we funded children's education as well as retirement plans over the past 26 years (when our oldest was born).
I agree with the importance of paying for education. Of that money I mentioned above saved for retirement, about 1/4 of it is in a taxable brokerage account at Vanguard. This can be used for education expenses. We plan to pay for our son's education.

Also, my mom has been a home economics teacher for about 40 years. Keep fighting the good fight!

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Mon Sep 16, 2019 7:30 am

Pudge wrote:
Sat Sep 14, 2019 8:22 am
daheld wrote:
Fri Sep 13, 2019 7:32 am
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
Unless you have a definitive time frame with a definite position in mind, then this isn't really an income strategy.
I do.
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
Secondly, don't plan on the pension. If it is there when you retire, fine. Pensions are going bust all over the country, and it will only get worse. The federal government is broke. You have a very long time horizon ahead of you, so don't plan on a pension being there when you retire. You need a back-up plan.
I'm not planning ON the pension, but it would be silly to not consider it. It is the most guaranteed pension/retirement benefit possible. That doesn't mean it's guaranteed, but I'm for sure going to consider the fact that it will in all likelihood be there.
Pudge wrote:
Thu Sep 12, 2019 8:48 pm
When you say, "For my line of work, the pay is good." What does that mean exactly? If I were the highest paid ditch digger, that wouldn't be my end goal (Nothing against ditch diggers, by the way). Start thinking less about the job itself, or the line of work, and think about your unique talents and skill sets and how those skills can be parlayed into more income. If you are a budget analyst, for example, perhaps you can take those exact same budget analytical skills to work in a different capacity, even doubling your income in the process.
This means exactly what it sounds like it means. For my line of work, the pay is good. Look, I make about half our household gross income. You can do the math. It's not a ton of money, but it's enough. It's also nearly what my parents made combined at their highest earning phase. My wife and I are in good shape financially. We have zero debt. We have about 4x our gross income stacked away for retirement in our mid 30s. Our home is 1/3 of the way paid off and will be paid off 10 years early. I am not interested in killing myself for a title when I am content and happy. And on the way to being financially independent and retired in my mid 50s.
If you have already cut expenses to the bone, then start to focus on the income strategy of the equation.

I said work smarter, not harder. You do that by exploring your unique talents and how those can be applied to double and triple your income.

What really unique skills and talents do you have that could be parlayed into income? Get creative and think longer term. Maybe you have great writing skills, and could write a book in your spare time. Maybe you collect stamps, or antique coins, and could turn this collection into a small fortune by the time you retire. Maybe you have great artistic skills or you like to collect antique cars. Just think about all the ways that you can get super creative to double and triple your income.

The market rewards ingenuity, creativity, and rare talents.
This is really bad advice.

EDIT: I feel like I need to expound on this rather than just leave the above statement. I am trained in a healthcare field. I currently make a good living compared to many of my peers. My work-life balance is phenomenal, which is rare among the particular sector of my field in which I work. I work a straight 40 hours a week and get a lot of stress free time at home with my wife and son.

Collecting stamps and antique coins? This is a joke right? You know what has happened to the market for these items, right? I have binders full of 1990s basketball and baseball cards. I bet they're worth a mint.

Collect antique cars? So you're telling me I should take a speculative gamble on a $20,000 hunk of steel rather than contribute to my retirement?

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CyclingDuo
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Re: Where should we cut back saving/investing?

Post by CyclingDuo » Mon Sep 16, 2019 8:14 am

daheld wrote:
Mon Sep 16, 2019 7:29 am
I agree with the importance of paying for education. Of that money I mentioned above saved for retirement, about 1/4 of it is in a taxable brokerage account at Vanguard. This can be used for education expenses. We plan to pay for our son's education.

Also, my mom has been a home economics teacher for about 40 years. Keep fighting the good fight!
:sharebeer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

mbasherp
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Re: Where should we cut back saving/investing?

Post by mbasherp » Mon Sep 16, 2019 9:14 am

daheld wrote:
Wed Sep 11, 2019 2:02 pm
If we need to further reduce investments, in what order should we reduce savings?
In case it hasn't been mentioned yet -
If you need to reduce investments further, stop contributing some or all new income to Roth IRAs and instead draw down the taxable account to do so. This is essentially what I do every January before replacing and adding to those taxable funds during the course of the year. There would be effectively no net change in your liquidity, but you continue to maximize the tax advantaged space.

Olemiss540
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Re: Where should we cut back saving/investing?

Post by Olemiss540 » Mon Sep 16, 2019 10:29 am

What is your current retirement nest egg?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Mon Sep 16, 2019 10:38 am

Olemiss540 wrote:
Mon Sep 16, 2019 10:29 am
What is your current retirement nest egg?
About 8 times current expenses. About 1/4 of this is in a taxable account and the rest is in TSP/401k.

Olemiss540
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Re: Where should we cut back saving/investing?

Post by Olemiss540 » Mon Sep 16, 2019 10:43 am

daheld wrote:
Mon Sep 16, 2019 10:38 am
Olemiss540 wrote:
Mon Sep 16, 2019 10:29 am
What is your current retirement nest egg?
About 8 times current expenses. About 1/4 of this is in a taxable account and the rest is in TSP/401k.
Then completely ignore the folks weighing in to trim your expenses. Save 30% of gross and you will easily be FI by 50 given 8x expenses on hand already.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Mon Sep 16, 2019 10:50 am

Olemiss540 wrote:
Mon Sep 16, 2019 10:43 am
daheld wrote:
Mon Sep 16, 2019 10:38 am
Olemiss540 wrote:
Mon Sep 16, 2019 10:29 am
What is your current retirement nest egg?
About 8 times current expenses. About 1/4 of this is in a taxable account and the rest is in TSP/401k.
Then completely ignore the folks weighing in to trim your expenses. Save 30% of gross and you will easily be FI by 50 given 8x expenses on hand already.
That's exactly what we're currently doing. We save a little north of 30% of gross income and don't sweat the small stuff. We are starting to get a little tight in terms of expenses now that we have a son in daycare, which is why I asked the question about the order of reducing investments. Appreciate your input. :sharebeer

Living Free
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Re: Where should we cut back saving/investing?

Post by Living Free » Mon Sep 16, 2019 11:09 am

Pudge wrote:
Sat Sep 14, 2019 8:22 am
Maybe you collect stamps, or antique coins, and could turn this collection into a small fortune by the time you retire. Maybe you have great artistic skills or you like to collect antique cars. Just think about all the ways that you can get super creative to double and triple your income.
I have to disagree with this idea. I would not recommend "investing" in collectibles (I put investing in quotes because I do not consider collectibles to be an investment). They do not pay rent/interest/dividends or produce products that generate revenue (such as real estate, bonds, and stocks). There are generally high transaction costs/dealer fees. And one has to pay to store and secure them (and possibly insure them). And they're probably volatile/speculative in terms of their price.

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daheld
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Re: Where should we cut back saving/investing?

Post by daheld » Mon Sep 16, 2019 11:14 am

Living Free wrote:
Mon Sep 16, 2019 11:09 am
Pudge wrote:
Sat Sep 14, 2019 8:22 am
Maybe you collect stamps, or antique coins, and could turn this collection into a small fortune by the time you retire. Maybe you have great artistic skills or you like to collect antique cars. Just think about all the ways that you can get super creative to double and triple your income.
I have to disagree with this idea. I would not recommend "investing" in collectibles (I put investing in quotes because I do not consider collectibles to be an investment). They do not pay rent/interest/dividends or produce products that generate revenue (such as real estate, bonds, and stocks). There are generally high transaction costs/dealer fees. And one has to pay to store and secure them (and possibly insure them). And they're probably volatile/speculative in terms of their price.
Right? This is easily the most bizarre bit of "advice" I've seen around here.

megabad
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Re: Where should we cut back saving/investing?

Post by megabad » Mon Sep 16, 2019 2:41 pm

Agree with your plan to start by cutting back on taxable and 529. I’m not sure I agree with going all in on traditional pre tax accounts though. Are you a FERS employee? Are you also SS eligible? I can see your income being pretty high in retirement. An oversized RMD might push you into a higher tax bracket unless you plan on giant Roth conversions prior to 70.5. Just a thought.

Pudge
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Re: Where should we cut back saving/investing?

Post by Pudge » Tue Sep 17, 2019 6:10 pm

Living Free wrote:
Mon Sep 16, 2019 11:09 am
Pudge wrote:
Sat Sep 14, 2019 8:22 am
Maybe you collect stamps, or antique coins, and could turn this collection into a small fortune by the time you retire. Maybe you have great artistic skills or you like to collect antique cars. Just think about all the ways that you can get super creative to double and triple your income.
I have to disagree with this idea. I would not recommend "investing" in collectibles (I put investing in quotes because I do not consider collectibles to be an investment). They do not pay rent/interest/dividends or produce products that generate revenue (such as real estate, bonds, and stocks). There are generally high transaction costs/dealer fees. And one has to pay to store and secure them (and possibly insure them). And they're probably volatile/speculative in terms of their price.
Wow, talk about missing a point. First, I never even mentioned the word investing. I simply was stating that a person can double and triple their income by looking at more creative ways to earn an income in a particular area of interest to which they have an affinity. He could become a coin dealer, or a stamp dealer, or any other form of creative activity.

Please refrain from taking my words out of context. Coin dealers and antique dealers typically start out as collectors, and then migrate to a dealership. Some eventually have retail store fronts. That's not the point. The point is that you can take an idea or a passion and turn it into an side gig that eventually becomes a full-fledged entrepreneurial venture. You know, entrepreneurs - The ones that actually run businesses that make this country work. The guys that hire most American employees. Perhaps you have never heard of such a thing?

No, instead you focus on whether or not coin collecting is a good investment taking my words completely out of context. Good grief. Entrepreneurs start with small ideas, work them part-time, and if they garner traction, can become multi-million dollar businesses.

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Wiggums
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Re: Where should we cut back saving/investing?

Post by Wiggums » Tue Sep 17, 2019 6:28 pm

CyclingDuo wrote:
Mon Sep 16, 2019 8:14 am
daheld wrote:
Mon Sep 16, 2019 7:29 am
I agree with the importance of paying for education. Of that money I mentioned above saved for retirement, about 1/4 of it is in a taxable brokerage account at Vanguard. This can be used for education expenses. We plan to pay for our son's education.

Also, my mom has been a home economics teacher for about 40 years. Keep fighting the good fight!
:sharebeer
Congratulations on the baby.

Make that a double. Teachers are so important. So is education. :sharebeer

Your doing very well. Keep doing what you’re doing.

My wife maintains quicken for our family. I’m not saying that you should change your method. But I will say that the historical data
Was so helpful when I wanted to retire.

Good luck to you.

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fortfun
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Re: Where should we cut back saving/investing?

Post by fortfun » Tue Sep 17, 2019 7:12 pm

You are doing great! We were at about the same point where you guys are 13 years ago (child, 529, investments, etc.) Here's what I would recommend:

1. Don't over spend on baby/child. Everyone says they won't but everyone does. We did and we could have saved a ton of money on all of the junk that we bought and then later donated to ARC thrift. Seriously, babies and kids are ALWAYS happier with the box than the expensive thing inside of it. Put that money toward a 529. My son just turned 13 and this is the first year that we really needed to buy an expensive gift for him (2 in 1 tablet).
2. Cancel Amazon Prime, Costco (memberships), and avoid the weekly runs to Target and Walmart. This costs an enormous amount of money when our kids were little and we really didn't need much of what we bought. We've done this recently and our spending in insanely low, yet we have everything we need. Buy the store brand at your grocery store and avoid going "shopping" for shopping's sake.
3. Start churning credit cards to pay for travel. We didn't know this until recently but now use the technique to pay for the majority of our flights/travel. Reddit has a nice churning "flow chart" that you can Google. Follow this flow chart and you can make an extra 5k+ a year.

During this time we contributed up to 500 a month into the 529s. Looking back, this was probably a mistake but it should be enough to cover instate tuition to a public college. In the end, was it a mistake? Hard to know for sure. I'd say just keep putting away as much as you can and if you can't decide, just split it up into the different options.

Best of luck!

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Wiggums
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Re: Where should we cut back saving/investing?

Post by Wiggums » Tue Sep 17, 2019 7:31 pm

fortfun wrote:
Tue Sep 17, 2019 7:12 pm
You are doing great! We were at about the same point where you guys are 13 years ago (child, 529, investments, etc.) Here's what I would recommend:

1. Don't over spend on baby/child. Everyone says they won't but everyone does. We did and we could have saved a ton of money on all of the junk that we bought and then later donated to ARC thrift. Seriously, babies and kids are ALWAYS happier with the box than the expensive thing inside of it. Put that money toward a 529. My son just turned 13 and this is the first year that we really needed to buy an expensive gift for him (2 in 1 tablet).
2. Cancel Amazon Prime, Costco (memberships), and avoid the weekly runs to Target and Walmart. This costs an enormous amount of money when our kids were little and we really didn't need much of what we bought. We've done this recently and our spending in insanely low, yet we have everything we need. Buy the store brand at your grocery store and avoid going "shopping" for shopping's sake.
3. Start churning credit cards to pay for travel. We didn't know this until recently but now use the technique to pay for the majority of our flights/travel. Reddit has a nice churning "flow chart" that you can Google. Follow this flow chart and you can make an extra 5k+ a year.

During this time we contributed up to 500 a month into the 529s. Looking back, this was probably a mistake but it should be enough to cover instate tuition to a public college. In the end, was it a mistake? Hard to know for sure. I'd say just keep putting away as much as you can and if you can't decide, just split it up into the different options.

Best of luck!
We saved each month for college too. I thought we saved too much until my son switch majors and started going to summer school to catch up on the new requirements. Also, if the child wants to get into a competitive major with limit slots, he/she might not get into their first choice school.

Yes, the kids always like the box and Popping the bubble wrap.
When they are teenagers, they ate all my food! And wanted to drive my car.

Daycare costs before starting school were insane.

We were really good about avoiding things with an annual membership/fee.

I love my kids, but they sure put a hurting on my bank account.
Last edited by Wiggums on Tue Sep 17, 2019 7:46 pm, edited 1 time in total.

Ob81
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Re: Where should we cut back saving/investing?

Post by Ob81 » Tue Sep 17, 2019 7:41 pm

daycare is no joke. Taxable goes first, then 529. I would probably just drop the taxable completely and let it compound for a while. If you had a project that you were saving for, then some adjustments are needed.

Good luck and congratulations.

bltn
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Re: Where should we cut back saving/investing?

Post by bltn » Tue Sep 17, 2019 8:38 pm

Congratulations on your current position and your strong saving habit.

I grew up with middle class parents whose primary saving goal until my dad reached 50 yo was saving for their children s college education. After that was completed, they began to save for retirement. Different priorities for different families. We saved what I thought was a lot in a 529 plan for our two children. It wasn t enough to cover two private university undergraduate educations and graduate school for each child. But it sure helped. My retirement savings was curtailed a bit but the satisfaction of having your children well prepared with good career opportunities is worth a lot to us. Definitely a better legacy than inherited money.

Federal pensions will be the last to go. But in your position, I would plan to support my own retirement with personal savings and social security, and consider the pension in 20 years a bonus resource. Oddly, that s the way I ve saved for our retirement. I ve put significant savings into after tax accounts, and have just funded my 401 k with my yearly bonus money. We ve ended up with a large chunk in after tax accounts which makes retirement much nicer. Wish we had more in the Roth. Keep adding to your after tax accounts.

I think your approach to accumulation is commendable. If you like your work well enough, working into your early 60 s wouldn t be a mistake. We like the idea of continued accumulation.

Your realization that spending time with your family is a lot smarter than I was at your age.

Best of luck.

k3vb0t
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Re: Where should we cut back saving/investing?

Post by k3vb0t » Wed Sep 18, 2019 6:23 am

Congrats on the new addition. You all are doing great. I feel you with the not making as much as everyone seems to make on BH. To that I say, you do you. And you’re doing great.

You’ve got a new kiddo and two working parents. Those telling you to start a side gig either don’t know or have forgotten what that’s like. I’d focus on making sure I got as much sleep as possible and maintained a regular exercise routine. No point in saving all that money if you don’t live to use it because of poor health choices.

I say cutting back 529 and taxable for a bit is 100% fine. You have to balance living for today and living for retirement. You’re making out your tax-advantaged space. Enjoy life and again congrats. There’s a lot of benefit to living in a LCOL!

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