Financial Check Up - Need Help!

**DaveInPgh** · 09-16-2016, 05:48 AM

You're going to be asked for a more detailed breakdown on all of your financials so the members can offer their best advice.

My first question is how is that 10% being distributed to your 401k/Roths? Does your employers provide a match, and are you contributing enough to get the maximum company match?

**cashisking500** · 09-16-2016, 06:01 AM

Thanks Dave.

What other information do you need?

Retirement breakdown is as follows:

My 401K: I contribute 5% which receives max match 5% from employer
Wife 401K: She contributes 3% which receives max match 3% from employer

The rest is put into our Roth IRA's...$400 a month to mine and $150 a month to wife's Roth.

**DaveInPgh** · 09-16-2016, 06:20 AM

What is your combined take home pay?

Also provide a breakdown of all of your monthly debt & expenses.

That will allow the members to offer suggestions for potential cuts in expenses, and to get an idea of whether any changes should be made to your EF.

**Jluke** · 09-16-2016, 06:38 AM

At a quick glance, I would bump your wife's Roth contribution to $400 as well.

still leaves $750 extra.

maybe you can increase the ROTH some more for each of you.

What is your mortgage term and %?

I wouldn't worry about the car debt IF you are going to put that 1k extra to good use (retirement, cash savings)

**GoodSteward** · 09-16-2016, 06:46 AM

Car Loan 1: $12,900 left (2.74% rate, 38 months left on 60 month loan)
Car Loan 2: $13,500 left (0.9% rate, 52 months left on 60 month loan)

Based on my loan calculator loan 1 should be aprox 354/month, and loan 2 is only 260$ a month? That sound right?

You must have put down a lot on car 2 or you're driving a really small new car to only have 13,5k left after just 8 months and got a .09%. I don't think you get that on used cars, just new.

Either way, you'll have to decide if being out of debt is worth the risk. Here are some options.

Option #1: Pull 13k to pay off car 1, apply the 354 to your car 2, and use the 1k to rebuild the fund. You would have car 2 paid off in just under 2 years and the efund built back up.
Total payoff time and rebuild EF = 23 months

Option #2: Same as option 1 but use the 1k on the car 2 instead of EF. Both cars would be paid off in 11 months, but you would go 11 months with only 4500$ EF, then all cash flow into EF after that.
Total payoff time and rebuild EF = 19 months

Option #3: Don't pull from Efund, but use the 1000$ towards the cars and snowball.
Total payoff time (no rebuild of efund) = 17 months

Just some ways to look at it. Time wise, keep the efund and just use that to pay down debt. Time wise JUST for the debt, option 2 is fastest. The other 8 months is how long it would take to build back to 17,5k with 1500$ a month(efund plus payments gained).

**GoodSteward** · 09-16-2016, 06:53 AM

Originally posted by Jluke View Post

I wouldn't worry about the car debt IF you are going to put that 1k extra to good use (retirement, cash savings)

Yeah, the car payments are not ruining you financially, and the interest is practically nothing. The real issue is do you want out of debt faster then build more retirement/savings, or do you want to build up retirement faster and not bother with paying off the cars as quickly? Btw if you Just snowball them as is you will pay them off in 45 months combined saving 8 months.

**cashisking500** · 09-16-2016, 07:10 AM

Thanks GoodSteward. Really appreciate the advice.

Yes, Car 2 is a new Honda Civic, where I was able to put 6k down. That really helped keep payment down.

**cashisking500** · 09-16-2016, 07:11 AM

Originally posted by Jluke View Post

At a quick glance, I would bump your wife's Roth contribution to $400 as well.

still leaves $750 extra.

maybe you can increase the ROTH some more for each of you.

What is your mortgage term and %?

I wouldn't worry about the car debt IF you are going to put that 1k extra to good use (retirement, cash savings)

Mortgage term is 30 years (Just over 28 left after refinance). Rate is 4.55%

**snafu** · 09-16-2016, 07:55 AM

It seems you both have newer cars since your last update. How does the KBB value of vehicles line up with remaining balance? Are you assessing house value from Zillow or similar?

I'm biased believing that every dollar needs a job. How effectively does your money work for you? I hope it's ok to suggest a quick read like Smart Couples Finish Rich [David Bach], likely available electronically at your library. Suggest checking the value and expenses of both 401K and ROTHs and ascertain how holdings mesh with each ROTH.

I've no idea how you manage your day-to-day finances but hope you are not literally tied to 'cash is king' while many CCs offer cash back in various guises for routine expenses like groceries, vehicle operation costs, utilities etc. It remains an effective exercise to note every spend in this pay cycle, in your cell 'note' app. Nuisance and often leads to 'walk away' from small items but clearly identifies previously undefined leakage.

During this period of evaluation, I suggest assessing insurance details to ensure you have correct value coverage for house, vehicles, life at competitive rates. In light of the recent Wells Fargo scandal, many of us are evaluating our bank services/costs. How much have you paid for bank service 2016 January - September? Are you paying for services you don't actually use? Do you have any inactive/dormant accounts?

Now that it's so easy to carry out financial transactions from your computer, do you need a brick and mortar bank? How many times do you physically visit your bank? Would CU services meet your needs? Would you be comfortable using total electronic banking for example?

Finally, I hope you've looked after important details like Will, Advance Care Directive and Revokable Trust.

**DaveInPgh** · 09-16-2016, 08:00 AM

Personally, I would focus on increasing retirement contributions. Your car loans are at great rates and the payments are not budge killers for your income.

There are many that don't favor how I manage my EF, but I am going to share it with you anyway. 6 months expenses is commonly recommended for the EF, with that money being held in savings. I only keep 3 months in savings and focus on maxing out both of our Roth IRAs each year. Contributions to your Roth can be withdrawn at any time. If you max out your Roths and need to make a withdrawal, you are not going to be able to put it back. So not a scenario you should consider unless it is an emergency, which is the purpose of a EF anyway.

**Jluke** · 09-16-2016, 08:29 AM

Originally posted by cashisking500 View Post

Mortgage term is 30 years (Just over 28 left after refinance). Rate is 4.55%

ok, with 1k left over each month always the possibility of another re-fi to 15 or 20-years to minimize the interest and get it paid off sooner. Lots of factors go into that decision so I won't go into it.

I'd stick with focusing on retirement and building some more cash savings.

When a car hits the $3-5k balance I usually pay it off b/c by that point I'm tired of making the monthly payment.

**DaveInPgh** · 09-16-2016, 08:34 AM

Originally posted by Jluke View Post

When a car hits the $3-5k balance I usually pay it off b/c by that point I'm tired of making the monthly payment.

Same here and I am currently in that situation. Owe about $3,700 at .9%. I know the money is better suited elsewhere but just getting tired of the payment.

**GoodSteward** · 09-16-2016, 09:58 AM

Originally posted by DaveInPgh View Post

Same here and I am currently in that situation. Owe about $3,700 at .9%. I know the money is better suited elsewhere but just getting tired of the payment.

Same reason I got rid a 700$ 0% balance this week. Tired of looking at it after just 3 months.

**Goldy** · 09-16-2016, 10:37 AM

It looks like you are a little behind in retirement as you suspected but it's not horrible. I would recommend increasing your Roth to 458 and the same for your wife so both are maxed which takes up about 470/mo from your 1,000 surplus. Remember that you are able to pull contributions from a Roth at any time should the need arise so some folks use it like an EF.

From your numbers I assume you are paying PMI so I would allocate the remaining 530 to reduce the mortgage to the point where you no longer pay that. At this time I wouldn't worry about the car loans.

Once PMI is paid off then I would switch from paying the mortgage to increasing your 401k. The 401k is a great deal since it is pretax money.

Financial Check Up - Need Help!