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 Post subject: MrMiser Financial Health Log
PostPosted: Fri Mar 01, 2013 10:30 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
Hello All-
I thought I'd give this forum a try - - - one, to see what people think about where we are at, and two, to track our progress.

I'm 36 and my wife is 26. Currently we have:

Mortgage:
$73,120 @ 3.75%, 10 year loan (8 years left). I estimate our house is worth about $90K.

CC Debt:
None

Other Debt:
We have ~$6k outstanding for medical bills. We just got the bill and haven't discussed payment terms, so I don't know what the rate will be.

We have a $10k student loan at 6.4%

We own our vehicles, although they both have about 115k miles on them.

Savings:
We have $5k in checking and $1k in savings. We use the envelope system at our house, so I'm guessing we have about another $2k in cash - - - reserved for eating out, misc items, vacations, etc.

Retirment:
We have $141k in a 401k, $74k in Roth IRAs and $4k in a traditional IRA ($220k total). I contribute 15% (including match) to my 401k. We max out our Roths each year. My wife does not contribute to her work 401k, since there isn't a match (maybe we should?).

Income:
After taxes, deductions, etc., we bring home about $7k a month.

----------------------------------------------------------------------------------------------

That's an overall snapshot of where we are now. I'm thinking we'll focus on paying down the school and medical loan until they are gone. Next, build up a 3 to 6 month buffer. However, after that, I'm at a loss. I'm not sure if I should attack the mortgage, or invest. Also worth noting is that we probably will move within 5 years. Our current residence is comfortable, but it's a $90k house.

I'd be interested to hear opinions on my situation. I'd also like to update this monthly, so I am compelled to keep pushing forward with our financial plans....

MrMiser


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Mon Mar 04, 2013 10:21 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
:) Ok, replying to myself...

I put $3k towards the student loan today. I'm working towards the Ramsey goal, which is eliminate non-mortgage debt, build an EF, and then (possibly) pay down the mortgage. I'll ignore Ramsey investing advice...

Debt
Medical: $0k/$6k Medical (0%)
Student Loan: $3k/$10k (30%)

Cash
Checking: $2k
Savings: $1k

I'm not accustomed to being so low on cash. Does it make anyone else nervous? I suppose $3k is enough to cover most emergencies, but still, it makes me nervous!

MrMiser


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Mon Mar 04, 2013 11:21 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 856
My initial thought is you are a little light on the cash, but I understand you are taking DR's advice....That's understandable when you are paying off credit card debt and the worse case scenario is you go back into CC debt. But that isn't the case for you....

You say you bring in $7k/month, but what do you spend? And what are you willing to give up to meet your savings goals?

Your age will dictate when you two "retire." I'd max your 401k, hold off on your wife's and once debt is re-paid build e-fund and start taxable investments. IF your wife has decent investment options, perhaps contributing to the 401k would be wise if facing the decision between that and taxable accounts.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Mon Mar 04, 2013 4:08 pm 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
We spend about $3,600 a month.

Entertainment: $100
Misc: $400 (hair cuts, non-grocery needs, etc.)
Restaurant: $100
Vacation Fund: $100
Gas/Electric: $150 (avg over the year)
Water: $55
Internet: $65 (no cable or telephone, internet only)
Wireless Phones: $109
Trash Service: $19
Gifts: $200
Clothing: $150
Fuel: $400
Groceries: $500
Mortgage: $1,077
School Loan: $198

Soon we'll have payments for the medical loan too. But, we still should have at least $3,000 excess a month.

Some items were mutually decided upon by my wife and me. For instance, $200 a month for gifts. Personally, I'd like to knock it back to $100 a month, but I'll pick my battles.

Also on our side is that our roof is new, we have a new kitchen, new windows, new electric service. Can you say money pit? Hopefully we are done for a while...

I'm thinking you are right - max out 401k, pay off debt, build non-retirement fund, then look at her 401k. And always, always max out our Roth IRAs.

Right now we are putting back a lot for retirement (~$22k a year). One would think we'll be ok (fingers crossed)....


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Tue Mar 05, 2013 5:58 am 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
600 dollars a month on food?! That is more than half of your mortgage. What are you guys eating?

I also think that the gifts are high and the miscellaneous are high if you are trying to cut back. If you feel comfortable, then enjoy.

I would really try to focus on the medical bills and the student loans, and then you can start giving gifts at your leisure. You're doing well as far as I can say. Nice job.


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Tue Mar 05, 2013 9:57 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
We do spend about $500 a month at the grocery. Does that seem high for two people? We eat healthy, for the most part. Also, the $500 includes odds and ends items like TP, toiletries, etc. There are some months when we are closer to $400, but I budget for $500.

I totally agree on the gifts being high. Basically we shell out $2,400 a year on gifts. That's a lot. A vast majority of that is spent on the wife's family. My parents are at an age where they don't care about physical gifts - they value time together. My sisters are grown, and we don't do gifts. My wife's family....ugh. It's like a damned contest every year. Worse yet, nobody in the family has the money to spare. I've suggested that we pull names from a hat. I was met with much resistance. I decided to let it ride.

We just started using the envelope system this year. Prior to that, I tracked everything in spreadsheets. You are right - - - $400 for misc is a bit high. We somehow manage to spend it. It doesn't help that we pay $150 each month for haircuts, and her hair coloring.

I've been considering using our envelope money to pay down her student loan. My thought is this: I can steal the money, temporarily, to help pay off her loan. When the loan is complete, I can back-pay the envelopes. By doing that, we won't be paying the monthly interest on the loans. Seems like a good idea?


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Tue Mar 05, 2013 10:18 am 

Joined: Mon Sep 21, 2009 9:04 am
Posts: 43
The grocery bill could be high, but I think it depends on the cost of living in your area. Who does the grocery shopping, and do you spend extra to buy organic food or brand names?


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Tue Mar 05, 2013 11:06 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
We live in Cincinnati, OH. My wife and I do the shopping together. We buy off-brand as much as possible. We were on a kick for a while of extreme couponing, but has strayed away from it for a few months. We could easily keep it to $100/week when coupoining - but of course, you are buying what's on sale. Not necessarily what you want. We have one large stash of Stove Top, amongst other things.

I'm going to have a chat with the wife tonight on liquidating our existing envelopes. I'm thinking I can come up with an extra $1,000 to $1,500 to pay down her loan. That'll take it to around $6,000.

Also, I forgot that we have roughly $1,500 in an old HSA account. We can use that to reduce the medical loan to $4,500.

My rought projections:
Current: School Loan $7,000, Medical Loan $4,500
End of March: School Loan $3,000, Medical Loan $4,500
End of April: Schoal Loan $0, Medical Loan $4,500
End of May: School Loan $0, Medical Loan $1,500
End of June: School Loan $0, Medical Loan $0

After June, we can start building our EF, and "paying back" our envelopes.

We've never had a large amount of cash, outside of retirement funds. It'll be different to have some cash onhand!


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Mon Mar 11, 2013 9:36 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
I made some more progress on our school loan. I convinced my wife that it was a good idea to take cash from our envelopes and apply it to the school loan. We put "IOUs" in the envelopes. We'll repay them after the loans are gone. By taking this approach, we'll finish paying off the loans sooner, which will save us the monthly interest. I have a great wife. I consider myself lucky.

Debt
Medical: $0k/$6k Medical (0%)
Student Loan: $5.5k/$10k (55%)

Cash
Checking: $2k
Savings: $250

We really are riding a fine line with our cash situation. However, I feel very secure at my job, and so does my wife. We'd be royally screwed if either of us lost our jobs right now...

A large part of my new-found financial motivation came after reading a Dave Ramsey book. I was horrified by the concept of what would happen if either of us lost our jobs. Without an EF, you immediately are broke. No money to pay the mortgage, grocery bills, etc. Living paycheck-to-paycheck is a risky proposition.

I was harshly reminded of this concept over the weekend. My wife's uncle was in a car accident. Someone wasn't paying attention, and the uncle got rear-ended - - - at no fault of his own. The uncle was driving a 1996 dodge neon. It was a beater, but a reliable beater. The neon is toast - the rear frame is mangled. So, he'll get some low-ball payout from insurance - - - probably $1,000. Unfortunately, he has $0 in savings. He filed for bankruptcy a few years ago. Now he'll be faced with trying to find a replacement car with the measly $1,000 insurance payout. Not good.

I wish we had more cash in hand. I like the uncle and would gladly help him if we could. But, we just aren't there yet. Frustrating...but someday, we'll be in a position to help.

MrMiser


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Thu Mar 14, 2013 4:29 am 

Joined: Fri Jul 29, 2011 8:38 am
Posts: 210
You are making good progress on your debts, so it won't be long until you can increase your savings. Good job so far!


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Sat Mar 16, 2013 5:41 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
More progress. I got paid, and I got a bonus. The total between the two was $2,700, and I applied all of it to the school loan.

Also, we got some final details about the medical loan. The total amount is actually $5,700. They said it's an interest free loan, but there is a $5/month service fee. I will admit, I'm suspicious of their terms. Anyhow, we cleaned out a $1,600 HSA account, applying all of it to the loan.

Debt
Medical: $4,100/$5,700 (28% paid off)
Student Loan: $1,800/$10,000 (82% paid off)

Cash on Hand
Checking: $1,700
Savings: $250

We are on track to pay off the student load by the end of March. We should pay off the medical loan by the end of April. The bonus at work really helped!

Anyhow, that's my self-motivating update! =)

MrMiser


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Sat Mar 23, 2013 6:44 am 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
Another self motivating update.

I made an ill-hearted attempt at home repair. I removed 5 interior doors, frames and all. I bought pre-hung doors, and quickly realized that my door jambs are wider than normal. My wife has grown tired of my misadventures in home repair, and is firm on calling in an expert. I have two contractors coming next week for estimates. I'm guessing this misadventure will set me back $2,500. Ouchy.

That's the bad news. The good news is that my wife got a $6,500 bonus ($4,997 after taxes). Yeah!!! Here's our updated status:

Debt
Medical: $4,100/$5,700 (28% paid off)
Student Loan: $0/$10,000 (100% paid off)

Cash on Hand
Checking: $5,200
Savings: $250

I think I'll build a cash reserve of ~$10k before paying the medical loan. It's an interest free loan with a $5/month service fee. So I'm not going to increase our risk by paying it off immediately.

I'm considering making another financial move. My wife has a $4,500 IRA, and I have a $2,000 IRA. I think I'm going to convert them to Roth IRAs. We both have existing Roth accounts. Converting the traditional IRAs will consolidate the accounts, giving me the advantage of including that money in my diversification / rebalancing.

My concern with the conversion is the tax consequences. We are on track to owe federal taxes for 2013. With the conversion, we'll owe enough to pay a penalty. I'm not sure how to fix that. I guess I need to change my withholdings? How can I figure out how much to have withheld?

Thanks,
MM


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Sat Mar 23, 2013 2:10 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
I don't know how much it costs to install doors, but 2500 seems like a lot to replace only doors. Maybe they have to order special doors because of the size of your door jambs..interesting..I guess if both contractors had the same estimate, that's how much it costs. *shrug*

As far as your withholding, there are calculators online which can give you an estimate as to what your proper withholding should be. I don't have links now, but I'm sure you can find them.

Great job on paying off the student loan! woohoo..


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Mon Mar 25, 2013 1:49 pm 

Joined: Fri Mar 01, 2013 10:11 am
Posts: 13
I got the first quote for my doors: $2,119. Unfortunately, my doors are all non-standard. Custom order. Cha-ching. I'm actually suprised they came in that low. I have one more contractor coming Wednesday for a check-bid.

It is so easy to stress out about money. I keep running estimates of what we'll need over the next few years. It's really stressful. We want a bathroom re-model and deck re-construction. We need our roths and we will need new-used cars. There's never enough money.

Today is one of those stress days...


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 Post subject: Re: MrMiser Financial Health Log
PostPosted: Wed Mar 27, 2013 2:21 pm 

Joined: Wed Mar 27, 2013 12:38 pm
Posts: 8
Location: Richmond, VA
Reading through this post, you have made excellent progress in such a short amount of time! Have you considered picking up some side jobs to build up your EF and pay off the house expenses? For example, I referee soccer and teach guitar lessons on the side. These types of jobs are nice because they are flexible and considered skilled, so they pay better than your standard retail or restaurant jobs.

Also, although you are not looking to convert a large amount over to a Roth, remember that it will be considered income for your tax return, so if you are close to entering a higher tax-bracket, you may want to convert less to avoid a higher rate. You mentioned a penalty, I am not aware of a penalty for a conversion, I thought only for taking money out early?

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