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rated:
We used to be budget conscious and frugal before, but for the last 2 years, have loosened up. I estimate we would be spending about ~$7k/month ( new child care costs). We buy good quality food, spend a little on small luxuries and buy some items that are not necessities, but pleasure (not too much).
Both spouses contributes to federal limit on the 401k ($36k) and Roth IRA ($11k).

1. As of today, what would be the the amount we should be saving (outside of retirement) to have a financially secure future? I want to know how financially similar families are doing across America.
2. How much should our monthly spending/budget be? Is $7k high?
3. How do I plan for strong financial future? What are the things should we be doing? (we have basics like LI etc)

Age: H33&W32+2Yo
Income (Approx.)
H                 $111k
W                $90k
Other           $5k
--------------------------------------
Total            $206k
--------------------------------------
* Incomes might only have average growth 1% at least in next few years.

NW as of now:
Retirement                 $372k    
non-ret accounts        $139k
Cash                         $164k    
Education                  $17.5k    
Rental Equity             $95k    
--------------------------------------------
Total                        $787k    (excludes primary home equity about $40k)
--------------------------------------------
Debts
Two mortgages - $301k @ 4%, 25 years left.
Auto loan - $27k - 0% 54 months left
Other Debts  - 15K  @ 0% APR, will be paid off when the offer ends (saving up for it)
After 3-4 years, our child might attend a private school costing up to $18k/year, which is expensive but we have no choice. 

Thanks!
 

Member Summary
Most Recent Posts
Agreed 165K is small but you have to look at it as a % of the total assets and that is pretty high. And just because you... (more)

PrincipalMember (Jul. 14, 2017 @ 11:54p) |

As long as you have a goal to invest that money, then having it in "cash" is OK. Else, you want to make that money work ... (more)

PrincipalMember (Jul. 14, 2017 @ 11:58p) |

samko (Jul. 17, 2017 @ 7:38p) |

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rated:
Looks to me like you're doing great.  Aggressive retirement savings, modest mortgage compared to income, emergency fund, no student loans or credit card debt...

My only advice would be that we've always lived on one income, even when we had two.  And as we've made more money, we haven't really changed our lifestyle, so we're reaching our savings goals sooner and project an earlier retirement than we thought possible,  and we are better situated to cover college expenses than we expected.  Where our friends seem to get in trouble is when they make more money and start to take on more obligations; second homes are probably the biggest culprit in our circle.

Unless you plan an early (say, before 50) retirement or some other drastic change in approach, keep doing what you are doing and you'll have plenty of money to retire.

rated:
Why would you calculate net worth without subtracting debts? In reality, you are only worth less than half a mil and with a 200k income, that's deep into the UAW category.

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netw said:   Why would you calculate net worth without subtracting debts? In reality, you are only worth less than half a mil and with a 200k income, that's deep into the UAW category.
 

  The 27k (auto) and 15k (other debt) must be subtracted from OP's nw calculation. But where are you getting "only worth less than half a mil" from?

OP doesnt include primary home value and hence the mortgage should also be left out. He mentions a net 40k equity, which is better to exclude to be conservative.

rated:
The primary home equity is already not included in nw.

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netw said:   Why would you calculate net worth without subtracting debts? In reality, you are only worth less than half a mil and with a 200k income, that's deep into the UAW category.
Oh! Looks like we are way under accumulators. Not sure how we got there, but, how much should we be saving yearly/monthly to get out of this status?

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netw said:   Why would you calculate net worth without subtracting debts? In reality, you are only worth less than half a mil and with a 200k income, that's deep into the UAW category.
 

He didn't add his house value in net worth. So what he did with regards to that is fine. But not OK with regards to auto/other.

Don't know if ~7K tells me anything - is that with mortage/without mortgage, factoring in mortgage deduction, yada yada...

Also, 787K doesn't tell me anything - how many years of savings is that? Was there a big shift in financial patterns during those years?

But overall, can't be doing too bad - maxing out both 401 and Roth.

I had done a rough estimate of my expenses. It went like this. Just throwing it out there for OP to compare (if he wants to) but not looking for feedback/nit-picking. It is what it is and at this rate, my finances will easily last me for another 100 years without working.
       
Mortgage 10800   138K outstanding
Property taxes 5500    
Property insurance 1200    
HOA 2160    
Healthcare 3000    
Car insurance+DMV fees 1500   2 Hondas
Gas for 2 cars 1800    
Water/Elec/Solar/Waste 4500    
Cell/Dish/Comcast 2400      2 cell lines
Eating out 4800    
Groceries+Costco 5500    
Kohl/Target/CVS 4000    
Travel 20000    
Total 67160    


rated:
OP, you're pretty much me, except 2-3 years, and $250k ahead. Wife and I were having a similar conversation earlier. I recommend putting a spreadsheet and forecasting out 30-40 years to see what your overall assets will be, as well as estimate expenses. Use a fixed cell value for % APY so you can play with the numbers and see the effects of a bull/bear market average (5%-8%). Also figure out your current annual expenses, and see when it will match 3% of your net worth.

For example, if you spend 7k/yr now, you would need $2.8M to withdraw 3% annually (which is an extremely safe withdrawal rate to essentially last you almost forever). It gets a little hairy when you consider pre vs. post tax, so it's good to diversify.

Our example -
Current NW - $525k (60k liquid, 350k retirement, 100k equity, 15k HSA)
- 36k/yr 401k
- 11k/yr Roth
- 7k/yr HSA
- 8k in home equity

Figure conservatively, we're saving 60k/yr, and would need ~8k/month in retirement, which comes out to a $3.2M net worth need. My forecast (assuming 5% growth) brings us out to 2039 when we hit our goal.

That would give you a good baseline - is 2039 too late for us to retire? If so, we can set a goal to up our savings rate and retire a few years early.

Note - I don't include primary mortgage in net worth, but I do include home equity. The main thinking on this is that our monthly expenses factor in PITI, so if I were to take out mortgage from net worth, then I should also take out PITI from expenses. I include home equity because it's "saved" and can be cashed out if we ever sell. 
 

rated:
You are doing better than perhaps 99% of the US households in terms of your assets/savings given your income and age.

By FWF standards, there certainly will be room to cut in your 7k/mo spending. You could consider savings an extra ~10k-15k a month to prepare yourself for the private school. Of course, day care cost would go away then.

In any case, if you are spending all your net income (after maxing out 401k/IRA) each year, I would try to cut somewhere to save an extra ~10k a year.

rated:
The 7k/month includes every imaginable expense including local travel for small vacations.

rated:
WalletFatKing said:   The 7k/month includes every imaginable expense including local travel for small vacations.
  
So the actual expense should be lower since you should get deduction for your interest payments/property taxes.

To me, looks like you have a good balance between savings/spending.

rated:
vnuts21 said:   OP, you're pretty much me, except 2-3 years, and $250k ahead. Wife and I were having a similar conversation earlier. I recommend putting a spreadsheet and forecasting out 30-40 years to see what your overall assets will be, as well as estimate expenses. Use a fixed cell value for % APY so you can play with the numbers and see the effects of a bull/bear market average (5%-8%). Also figure out your current annual expenses, and see when it will match 3% of your net worth.

For example, if you spend 7k/yr now, you would need $2.8M to withdraw 3% annually (which is an extremely safe withdrawal rate to essentially last you almost forever). It gets a little hairy when you consider pre vs. post tax, so it's good to diversify.

Our example -
Current NW - $525k (60k liquid, 350k retirement, 100k equity, 15k HSA)
- 36k/yr 401k
- 11k/yr Roth
- 7k/yr HSA
- 8k in home equity

Figure conservatively, we're saving 60k/yr, and would need ~8k/month in retirement, which comes out to a $3.2M net worth need. My forecast (assuming 5% growth) brings us out to 2039 when we hit our goal.

That would give you a good baseline - is 2039 too late for us to retire? If so, we can set a goal to up our savings rate and retire a few years early.

Note - I don't include primary mortgage in net worth, but I do include home equity. The main thinking on this is that our monthly expenses factor in PITI, so if I were to take out mortgage from net worth, then I should also take out PITI from expenses. I include home equity because it's "saved" and can be cashed out if we ever sell. 
 


Terrible rationalization. Of course OP doesn't include home equity and mortgage since it will make him look poor. The definition of net worth is assets minus liabilities. Once you sell you can take everything off the books. You are only fooling yourself.

rated:
This post made us realize/understand that we are low net worth etc., thats why we are asking what we should be doing to get out of being financially bad state. At what nw, savings are similar families in America?

Actually, I figured my primary residence value (conservative) - my mortgage balance = ~$165,000. Just a little more ingo. I know ut still does not takes us out of UAW.

rated:
terri590 said:   
vnuts21 said:   OP, you're pretty much me, except 2-3 years, and $250k ahead. Wife and I were having a similar conversation earlier. I recommend putting a spreadsheet and forecasting out 30-40 years to see what your overall assets will be, as well as estimate expenses. Use a fixed cell value for % APY so you can play with the numbers and see the effects of a bull/bear market average (5%-8%). Also figure out your current annual expenses, and see when it will match 3% of your net worth.

For example, if you spend 7k/yr now, you would need $2.8M to withdraw 3% annually (which is an extremely safe withdrawal rate to essentially last you almost forever). It gets a little hairy when you consider pre vs. post tax, so it's good to diversify.

Our example -
Current NW - $525k (60k liquid, 350k retirement, 100k equity, 15k HSA)
- 36k/yr 401k
- 11k/yr Roth
- 7k/yr HSA
- 8k in home equity

Figure conservatively, we're saving 60k/yr, and would need ~8k/month in retirement, which comes out to a $3.2M net worth need. My forecast (assuming 5% growth) brings us out to 2039 when we hit our goal.

That would give you a good baseline - is 2039 too late for us to retire? If so, we can set a goal to up our savings rate and retire a few years early.

Note - I don't include primary mortgage in net worth, but I do include home equity. The main thinking on this is that our monthly expenses factor in PITI, so if I were to take out mortgage from net worth, then I should also take out PITI from expenses. I include home equity because it's "saved" and can be cashed out if we ever sell. 


Terrible rationalization. Of course OP doesn't include home equity and mortgage since it will make him look poor. The definition of net worth is assets minus liabilities. Once you sell you can take everything off the books. You are only fooling yourself.

Get off it, it's safe to assume that OPs home is worth more than what he owes on it...how does it make him poor?   Assuming I'm right about home value > mortgage, including it would only increase his NW calculation.

My only advice, OP is to keep doing what you're doing, it's working.  You're in very good shape given your age & income.  I would also suggest doing something will all that cash you're holding - even T-bills are better than just leaving that much cash.

rated:
WalletFatKing said:   This post made us realize/understand that we are low net worth etc., thats why we are asking what we should be doing to get out of being financially bad state. At what nw, savings are similar families in America?

Actually, I figured my primary residence value (conservative) - my mortgage balance = ~$165,000. Just a little more ingo. I know ut still does not takes us out of UAW.

  

You are not "low" net woth.

For your age you're far above median net worth.

I don't see data for age + income level for people in their 30's with 200k income but again I highly doubt you are on the "low" side.    You're probably above average.


 

rated:
jerosen said:   
WalletFatKing said:   This post made us realize/understand that we are low net worth etc., thats why we are asking what we should be doing to get out of being financially bad state. At what nw, savings are similar families in America?

Actually, I figured my primary residence value (conservative) - my mortgage balance = ~$165,000. Just a little more ingo. I know ut still does not takes us out of UAW.

  

You are not "low" net woth.

For your age you're far above median net worth.

I don't see data for age + income level for people in their 30's with 200k income but again I highly doubt you are on the "low" side.    You're probably above average.


 

  OP: UAW was mentioned in one post by a "New member" who was trolling. Ignore that. Even by FWF standards (where everyone makes 100k out of college and have a 1Mil net worth by age 30), ~750k in net worth is very good. I would wager it is well above median for your age even within FWF (if one were to use real numbers, not fake).

rated:
terri590 said:   
vnuts21 said:   OP, you're pretty much me, except 2-3 years, and $250k ahead. Wife and I were having a similar conversation earlier. I recommend putting a spreadsheet and forecasting out 30-40 years to see what your overall assets will be, as well as estimate expenses. Use a fixed cell value for % APY so you can play with the numbers and see the effects of a bull/bear market average (5%-8%). Also figure out your current annual expenses, and see when it will match 3% of your net worth.

For example, if you spend 7k/yr now, you would need $2.8M to withdraw 3% annually (which is an extremely safe withdrawal rate to essentially last you almost forever). It gets a little hairy when you consider pre vs. post tax, so it's good to diversify.

Our example -
Current NW - $525k (60k liquid, 350k retirement, 100k equity, 15k HSA)
- 36k/yr 401k
- 11k/yr Roth
- 7k/yr HSA
- 8k in home equity

Figure conservatively, we're saving 60k/yr, and would need ~8k/month in retirement, which comes out to a $3.2M net worth need. My forecast (assuming 5% growth) brings us out to 2039 when we hit our goal.

That would give you a good baseline - is 2039 too late for us to retire? If so, we can set a goal to up our savings rate and retire a few years early.

Note - I don't include primary mortgage in net worth, but I do include home equity. The main thinking on this is that our monthly expenses factor in PITI, so if I were to take out mortgage from net worth, then I should also take out PITI from expenses. I include home equity because it's "saved" and can be cashed out if we ever sell. 


Terrible rationalization. Of course OP doesn't include home equity and mortgage since it will make him look poor. The definition of net worth is assets minus liabilities. Once you sell you can take everything off the books. You are only fooling yourself.

  Why would I count both mortgage as a liability and PITI payments in my yearly expenses? If I get rid of the house, I get rid of the mortgage and the expenses, but keep the equity. 

The mortgage isn't a debt in the traditional sense, in that it wouldn't ever be called at once. Yes, I have to keep paying it every month, but that's figured into the yearly expenses. 



 

rated:
Forgot to include HSA balance of $20k in networth, not sure if it nakes any difference.

rated:
WalletFatKing said:   1. As of today, what would be the the amount we should be saving (outside of retirement) to have a financially secure future? I want to know how financially similar families are doing across America.
2. How much should our monthly spending/budget be? Is $7k high?
3. How do I plan for strong financial future? What are the things should we be doing? (we have basics like LI etc)
1. If you want to retire early, then you should be saving whatever you can. That means going back to a budget and controlling your spending -- every dollar wasted will cause you to retire later. If you don't care about retiring early, then you're saving plenty already.
2. Your monthly spending should not really be based on income or net worth. If you want to retire early, it should be as low as you can manage. $7k/mo ($84k/yr) is definitely high IMO, especially considering that the average household income is somewhere near $50k. Sending kids to private school is an expensive choice. Not having a choice is an expensive choice. When faced with issues like this, think about what much less fortunate couples would do, and consider doing that.
3. I think you're set. You even have a rental. Maybe get a few more if that's your thing. Make sure you're not paying high fees on your investments. Learn about Backdoor Roth if you haven't already, since you're close to the income limit. Also consider Mega Backdoor Roth, since you clearly have too much money to spend. I don't think there's anything else to it.

One other thing, you should be keeping an eye on mortgage rates. They were close to 3.25% (for primary) last summer and fall, and you should have refinanced.

rated:
Are you are holding $165k in cash i.e. earning only 1% on it? Big mistake. I was looking at some of my accounts today and most are up 20-25% for this year. You do the math on $165k. Ouch!

I started receiving a 10 year annuity this year. First payment was in March. If it had a $10 account worth, they gave me $9. Now that account is worth $9.60. The power of compounding money is astonishing - I make more money in stock market gains than my salary and a lot of that is taxed at lower rates.

If you are scared about the market, buy some high quality dividend companies and sell deep in the money calls on those - rate of return around 5%. And the dividends at least would get preferential tax treatment. And if you dont know what I just said, go learn since 5% of 165k is 8k - that is a lot of pocket change. Or pay your mortgage - that is worth 4% in rate of return.

rated:
PrincipalMember said:   Are you are holding $165k in cash i.e. earning only 1% on it? Big mistake. I was looking at some of my accounts today and most are up 20-25% for this year. You do the math on $165k. Ouch!

I started receiving a 10 year annuity this year. First payment was in March. If it had a $10 account worth, they gave me $9. Now that account is worth $9.60. The power of compounding money is astonishing - I make more money in stock market gains than my salary and a lot of that is taxed at lower rates.

If you are scared about the market, buy some high quality dividend companies and sell deep in the money calls on those - rate of return around 5%. And the dividends at least would get preferential tax treatment. And if you dont know what I just said, go learn since 5% of 165k is 8k - that is a lot of pocket change. Or pay your mortgage - that is worth 4% in rate of return.


Lol 165k isn't alot but this is the fwf way. Patty has a mil liquid just because it makes her feel better.

rated:
Of the $165k we have an emergency fund of $50k in penfed 3% 5 yr cd+muni bond fund, $15k to payoff the 0% debt saved in savings account and $100k liquid in an Ally MM account.

The reason we have the $100k there is because we want to buy a rental unit, but we are pausing as we feel the RE market is bubbling!

As our deferred, roth and trading account ($550k of nw) is all invested in stock market casino and bonds, we felt $100k RE will be a little diversification.

BTW our rental equity is built up to $110k, pays a dividend of $450/month (after mtg and fees).

Few members make us feel poor, but I am going to ignore them.
I would like to see where we stand compared to similiar familes in America and a numer to assign as our savings goal.

rated:
vestium said:   
Lol 165k isn't alot but this is the fwf way. Patty has a mil liquid just because it makes her feel better.

  
Agreed 165K is small but you have to look at it as a % of the total assets and that is pretty high. And just because you say, "this is the fwf way" - it doesn't make it the fwf way. Fwf way is about making money and leaving that much money in cash has nothing to make the wallet fat.

rated:
WalletFatKing said:   Of the $165k we have an emergency fund of $50k in penfed 3% 5 yr cd+muni bond fund, $15k to payoff the 0% debt saved in savings account and $100k liquid in an Ally MM account.

The reason we have the $100k there is because we want to buy a rental unit, but we are pausing as we feel the RE market is bubbling!

As our deferred, roth and trading account ($550k of nw) is all invested in stock market casino and bonds, we felt $100k RE will be a little diversification.

BTW our rental equity is built up to $110k, pays a dividend of $450/month (after mtg and fees).

Few members make us feel poor, but I am going to ignore them.
I would like to see where we stand compared to similiar familes in America and a numer to assign as our savings goal.

  
As long as you have a goal to invest that money, then having it in "cash" is OK. Else, you want to make that money work for you. And you should definitely ignore comments that are trying to make you feel poor/UAW - as I said earlier, you are doing fine.

rated:

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