Back by popular demand, I present to you another “Inside Look” at a reader’s finances! Woohoo! Ever since posting George’s budget up the other week, I’ve been getting handfuls of emails for us to review and I think it’s all just fabulous. Looking at others’ finances is what got me hooked on blogging in the first place! And the reason I keep blogging about my net worth updates too :) I was addicted to Jonathan’s posts over at My Money Blog and figured I’d carry on the tradition when I started mine 4+ years ago… So I’m glad y’all like this stuff!
(A quick note to everyone who’s submitted their numbers to me so far – it’ll take me a while, but I plan on using each and every one of them so thanks for sending them in! I’ll do my best to feature them as soon as I can, but it may take a while :))
But today belongs to our new friends, Samantha and Chad. Who says all her friends think they’re crazy for the way they’re handling their finances right now ;) Here are their stats down below, what do YOU think?
Me (age 29), Him (age 30); no children or plans for any.Assets:Emergency Fund: $10,000Other Savings: $8,000ROTH IRA (his): $8,000ROTH IRA (hers): $7,000TRADITIONAL IRA (hers – rolled over from a previous 401(k)): $16,000Liabilities:Just the mortgage yay! (Home value ~$150,000)$89,000 – we are 1 year into a 30 year loan/ 5 year ARM, so only 4 years remaining of fixed interest at 2.55%Income:Our Gross income: ~$6,900 (fluctuates a bit with overtime, but this is the base)Health & Dental Insurance: $135.Taxes: $1,218Net Monthly Income: $5,547Expenses:ROTH IRA (hers): $416ROTH IRA (his): $416401(k) (no employer match): $268Escrow: $300Mortgage: $486House Utilities: $385Details: Electric: $100Water/trash: $35Natural Gas: $90Cell phones: $75Internet: $45Food: $240Gasoline: $250Car Insurance: $50Life Insurance: $35Dog: $90Entertainment: $50Sponsor a Child: $50Gifts: $50Clothes/Misc: $40Blow Money: $200 ($100 for each of us)Car Replacement Fund: $200Home Repair Fund: $80Monthly Expenses: $3,606Amount Leftover: $1,941/month
And this is their main goal:
Our main goal right now is investing for retirement, while aggressively paying off the mortgage. We are saving 15% of gross income between the three IRAs, and the leftover amount each month is applied toward the mortgage ~$2,000. We are shooting for a payoff date of December 2014, but this is dependent on many factors, such as overtime hours and the possibility of getting a roommate to rent out our 2nd bedroom. We have wills and Term Life Insurance for each of us at $400k. We have many other areas where we could be spending and aren’t, such as vacationing and tithing, which we have chosen to pause until the mortgage is gone.
I guess I am looking for objective feedback here… Are we crazy? (All of our friends think so.)
J. Money Thoughts:
First, it depends on your definition of “crazy” ;) Many people who go against the crowds are considered geniuses! And in my professional opinion, you guys are def. amongst them ;) Although it does look like it took you a while to get on a good game plan there with your retirement accounts, yeah? At least with your husband? Did something happen to get you guys to honker down and start killing it, or did you just start making a bit more money now? Overall I’m pretty impressed though.
Here are my thoughts:
- The obvious one first: Your mortgage plan – It’s not that shocking that I think your plan here is simply fantastic :) I’ve been a HUGE fan of getting all debts down to $0.00 for almost a year now, and it looks like you guy are doing a much better job than myself considering my motivation is slowly waning in recent months… even though I KNOW it’s such an incredible feat!! Not many people can pull this off even if they wanted to (esp. in YOUR timeline here) so you guys are on a damn good path of making this happen. You already have over $60,000 in equity!
- Your Assets: A little low for your ages as I pointed out, but from the looks of your budget you’re done playing around and ready to amp things up :) Your future IRA plans look dope, and you’ve got a ton of savings between your emergency fund and your “other savings” account – giving you a solid 9 months of padding in the even you both lost your jobs or something equally tragic (excluding “extra” investments/savings) And luckily you have a lot left over every month too in the event you want to feel even MORE secure later down the road! Well done.
- Liabilities: AWESOME!! Wow, just your mortgage? Good for you guys. Mortgage arms usually scare me too much, but since your plan is to nix it out entirely over the next two+ years it really doesn’t matter by then now does it? You’ll be home-free quite literally by then! Loving this!
- Income: I’d say that looks pretty decent for your ages, though not sure where you live or what you do :) But numbers wise, nothing looks glaring to me. As long as it rises over the years steadily…
- Expenses: MAN you guys are frugal! Haha… $200ish on food every month? $50 on entertainment? Y’all blow me out of the water like woah here, nicely done :) Even with Internet – we subscribe to all sorts of services that total around $150 a mo! Digging the “Car Replacement Fund” too – very smart. As well as with your monthly IRA contributions – looks like you’ve divided it all up so that at the end of the year you both will max them each out, congrats :) As I mentioned yesterday, maxing out is one of my favorite and most important goals! And since you don’t get any matching with your 401(k), it makes sense to keep that category lower.
- Your leftover money each month: Incredible. That’s almost 35% of your NET take home pay – you can do some serious damage with that! (And already are). It’s great to have options, isn’t it?
My overall score: A
I should probably give you an A+ here, but I’ve been told I’m too easy on people with this stuff ;) And I would like to see a bit more in your retirement accounts than what the current levels are showing, although your future plans WILL show a nice increase as the months truck by. So I can’t really fault you for that from this point forward, now can I?
All in all I REALLY think you’re on a great path here, Sam. And at any point you can always divert some of that $2k another direction if you guys want to change routes down the road – it’s a huge padding to have every month and you guys should def. be proud! Congrats! :)
So that’s my humble opinion anyways. What do YOU ALL think? Pros? Cons? Would you do anything differently? Spill the beans and help Samantha and Chad get better! Thanks guys… freakin’ awesome community we’ve got brewing here :) We’re one lucky family…
PS: Like this series? Check out the first one we did a few weeks ago!
PPS: Want to shoot us over YOUR finances? Submit them here. It’ll take me a while to get to them all, but I promise to do my best to get ’em up :) Just copy the format you see above when sending it over as we don’t have a good form in the works yet, thanks…
(Photo by John “Pathfinder” Lester)
Featured savings tip
You already know that banks pay $$$ for the privilege of holding your money…it’s called interest. But maybe you didn’t know this: that so-called interest can be as little as .01%. If your cash savings aren’t sitting in a high interest savings account that earns you at least 1%, you’re basically saying “no” to free $$$!
Now, obviously the 1% interest you get with a high interest savings account like the one at Discover bank won’t make you rich, but that extra 1% compounded over 30 years can grow into a *big* pile of cash. And if you wanna hit lofty $$$ goals, you should be looking for every edge possible.
Here’s another way to look at it: if you leave $50,000 in a regular savings account, that’s almost $500 you’re just throwing away, each and every year you don't setup a high yield savings account! Will you do 5-10 minutes of work right now to earn an extra $500/year for years to come?
If you said “heck yes”, then you can setup your high interest savings account here to start earning 1% on your cash savings.