Financial Picture

**Fishindude77** · 05-26-2015, 06:06 AM

Your in pretty good shape. Should probably be giving advice, rather than asking.

Looks like the $80K cash would be an adequate emergency fund. My only suggestion would be to use any excess funds to pay down the mortgage and auto loans as soon as you can. Getting free and clear of those debts will feel great. Buy your next car cash.

**TBH** · 05-26-2015, 06:33 AM

Just curious--why are your wife's financials not included? Do you not share income, expenses, assets and debts?

Ignoring that for now, it does look like you're doing great. If it were me I'd probably use that $500 a month to pay down debt faster. You seem to be in good shape otherwise. Your debts are low interest, but it's still not awesome to be paying off your HVAC system and your car.

**Jluke** · 05-26-2015, 07:12 AM

Financial Picture

Originally posted by TBH View Post

Just curious--why are your wife's financials not included? Do you not share income, expenses, assets and debts?

Ignoring that for now, it does look like you're doing great. If it were me I'd probably use that $500 a month to pay down debt faster. You seem to be in good shape otherwise. Your debts are low interest, but it's still not awesome to be paying off your HVAC system and your car.

I am responsible for the bigger picture items in our financial plan. My wife's income is directed at certain household expenses and her personal expenses (she has no debt and her own EF). She contributes to her 401k. We keep the money separate. This allows me to be the saver.

Additional details:
I round up the car payment to $500.
I went a long stretch of time paying extra on the mortgage (160k down to 95k in 5 years prior to a recent refinance in 2013). No debt would be great.

however, I'm wondering if tying up even more cash and future earnings into the house is a good idea since the rate is so low and it will be paid off in 8 years (or less as I may pay off when there is about 20k remaining on the loan).

Appreciate the feedback!

**rennigade** · 05-26-2015, 07:43 AM

Originally posted by Jluke View Post

I am responsible for the bigger picture items in our financial plan. My wife's income is directed at certain household expenses and her personal expenses (she has no debt and her own EF). She contributes to her 401k. We keep the money separate. This allows me to be the saver.

You mean you both have separate accounts where she keeps track of hers and you keep track of yours? Im guessing so. People on here will call you out when you start talking about "separate" things when you're married...since technically its all one big pot.

**autoxer** · 05-26-2015, 08:00 AM

I wouldn't rush to pay off the low interest debt, when you aren't even taking full advantage of the retirement accounts. You can reduce your tax liability by maxing out the 401k & IRA. Unless you have some other short term goal that requires cash, think long term.

**JoeP** · 05-26-2015, 08:49 AM

I don't see any college fund. Do you plan on starting one soon?

Also, technically, your utilities and escrow are not considered debt because you are not borrowing. Those are simply expenses.

**Jluke** · 05-26-2015, 09:15 AM

Originally posted by JoeP View Post

I don't see any college fund. Do you plan on starting one soon?

Also, technically, your utilities and escrow are not considered debt because you are not borrowing. Those are simply expenses.

Thank you for the reply.

I did some research on 529 and am not comfortable with one as a savings mechanism (restrictions, penalties, etc).

The Taxable Investments and Roth accounts are designated for college contributions - or a nicer retirement should they not be needed.

HVAC is a loan; I treat the escrow as debt b/c I handle property taxes and insurance on my own.

**Goldy** · 05-26-2015, 09:58 AM

Good job so far! By 40 you should have about 3x your salary in retirement to be on track which it looks like you should be unless you raid your Roth to pay for college. If this were my budget I would tweak it just a bit to make sure I could retire stress free.

1). This would be a whole lot easier if we knew your wife's side of the picture.

2). 80k is a lot for an EF, the common rule of thumb is 3-6 months of expenses not income. For those conservative types you can go as high as 12 mo expenses and based on your finacial choices so far I doubt you spend 80k a year. I would recommend using 19k of the cash to pay off the car. Yes the car interest rate is low but it frees up 400 bucks a month and your bank isn't giving you 1.9% in interest.

3) use the extra 400 from the car loan and top off the Roth for both you and your wife. Max on the Roth is 5500 so you are almost there already.

4). I'd be a little uncomfortable only saving 9k per year in my 401k if I was the "saver" in the family. I'd allocate some of your left over 500 to increasing the 401k. Saves on taxes too.

5). Vacation? Are you enjoying life? Don't forget to have some fun.

**bjl584** · 05-27-2015, 04:37 AM

why aren't you maxing your ROTH(s)?

Other than that, it looks like you're doing just fine.

**autoxer** · 05-27-2015, 05:36 AM

Originally posted by bjl584 View Post

why aren't you maxing your ROTH(s)?

and the 401k?

**tripods68** · 05-27-2015, 07:06 AM

Originally posted by Jluke View Post

Hi,

New to the forum and wanted to get some advice/comments on my financial situation and what more I can be doing for now and the future. My wife's financial info is not included.

Age 38
Family: Married, 2 year old
Monthly Income (Net): $4600 (90k/year Gross + 10% bonus)

Assets
401k: Balance $260k; Contributions: 11%
Cash: $80k
Taxable Investments: $46k balance
Roth Investments: $26K balance with $300/month contribution and stock buys (target contribution $4600/year)
Employer Stock Options expiring 2017, 2018, 2019

Debts
Mortgage: $902/month ($74k balance at 2.875% with 8 years remaining)
Escrow: $600/month
Car Loan: $463/month ($19k balance at 1.9% with 4 years remaining)
HVAC: $150/month ($8k balance at 0% with 4.5 years remaining

Life Insurance
Term: 250k (20 year policy ending at age 57)
Employer: 3x salary

At the end of the month I have around $500 to "play with". Let me know your thoughts on the situation above and/or if additional info is needed.

Thanks in advance for your time.

Here's what I would do in your situation to have a better financial outcome: ELIMINATE DEBT COMPLETELY:

1) Use $80K cash to pay off the Mortgage $74K. Still leaves you 6K. To rebuilt your savings back up to $74K will take only 6.8 years except without mortgage interest. Better than 8 years to payoff the mortgage @ 2.8%

2) Use some of your $46K in taxable account to Pay off the car $19K + 8K = $27K. This save you $613 to rebuilt your taxable account back up to 44 months. Burden off your shoulder.

This is more than just paying off DEBT. You will be DEBT FREE with NO ONE to OWE anybody else and you'll feel differently and weird!

3) When two people work together in harmony, better things are achieve in life. Having 1 separate account is better than 2 separate. Been there done that myself! Its like pulling a car with one person--takes a long time and its exhausting. All that means you and your partner have to talk more about budgeting openly. Been there than done myself!

You're WELCOME!

**Jluke** · 05-27-2015, 07:09 AM

Financial Picture

Thanks to all who have taken the time to reply.

It sounds like I need to increase my 401K even more (went from 6% to 11% Jan 2015 to reduce tax bill of appx $500 in 2014) and max the Roth contributions first.

for those interested in my wife's income, suffice it to say that her salary allows for a 6% 401K contribution and covers the most basic expenses a person can have; plus a few fun purchases and splurges here and there for her and our son. None of which break the bank; nor would have a big impact on our overall financial picture if we decided to save it instead. She is doing the 52-week challenge this year.

Vacation/Fun: I didn't include info on a separate money market account where I keep about 5k at a given time to cover the annual beach vacation, day trips, medical, taxes, etc (a small EF) so I don't have to dip into the large cash account. If it grows too large, some of it gets transferred to the other bank.

Regarding the large amount of cash: I would be more inclined to put 19k towards stock/investments, mortgage principal, or home improvements before paying the car loan off in one fell swoop (it would take 38 months to recoup 19k at 500/month). I think this is the next item I need to address so if anyone has additional ideas on a good way to use this cash I am open to any and all ideas.

Thanks!

**autoxer** · 05-27-2015, 08:12 AM

Originally posted by Jluke View Post

It sounds like I need to increase my 401K even more (went from 6% to 11% Jan 2015 to reduce tax bill of appx $500 in 2014) and max the Roth contributions first.

I prefer to focus on minimizing the total tax instead of whatever the refund/credit is in April. The tax withholding from your paycheck can easily be adjusted to make the refund/credit whatever you want it to be.

Look at line 63 of last years form 1040 for the total tax you owed. I don't know for sure, but I'm guessing your wifes income pushes you into the 25% tax bracket, which would make the 401k contributions that much more valuable. So if your total tax owed for the year is around $15k, you could probably reduce that by $2k just by maxing out your 401k. You could also shelter more of your income from tax, by increasing your spouses 401k contribution.

Regarding the large amount of cash, you seem to be thinking rationally about prioritizing investment/mortgage paydown over paying down the lower interest debt. Emotionally it is easy to justify paying the lower rate debt, but if you don't have a cash flow problem, then you can take a more long term outlook. Have you decided how much cash you want to keep as your emergency fund?

**Jluke** · 05-27-2015, 09:18 AM

Originally posted by autoxer View Post

I prefer to focus on minimizing the total tax instead of whatever the refund/credit is in April. The tax withholding from your paycheck can easily be adjusted to make the refund/credit whatever you want it to be.

Look at line 63 of last years form 1040 for the total tax you owed. I don't know for sure, but I'm guessing your wifes income pushes you into the 25% tax bracket, which would make the 401k contributions that much more valuable. So if your total tax owed for the year is around $15k, you could probably reduce that by $2k just by maxing out your 401k. You could also shelter more of your income from tax, by increasing your spouses 401k contribution.

Regarding the large amount of cash, you seem to be thinking rationally about prioritizing investment/mortgage paydown over paying down the lower interest debt. Emotionally it is easy to justify paying the lower rate debt, but if you don't have a cash flow problem, then you can take a more long term outlook. Have you decided how much cash you want to keep as your emergency fund?

Agree with your perspective I just said it differently (I think). Also agree on manipulating for tax purposes - I have had both of our W-2's set to Married 1 so we get more money during the year and the final bill is minimal.

My taxable income alone falls in the 25% bracket and this year I'll probably be there too b/c of larger than normal bonus and exercise of stock options.

When I itemize on taxes, I am also very close to the standard deduction so I have to take that into account somehow? My mortgage interest will be less this year so there's a chance I can't itemize - I haven't done that math yet.

I do not have any cash flow concerns, so an EF in Cash of 60k is good for me.

So I have 20k to put to use. I'd like my money to work for me and would consider thinking in 4 blocks of 5k to allocate as needed (invest, improve, debt reduce, other??).

Financial Picture