The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Also, please leave constructive comments, questions, and so forth. Simply telling someone what a mess they have, how they have made poor decisions, and so forth is not helpful. There is a way to say, "That was a mistake, but here's what you can do to correct it" that both acknowledges the problem and offers a solution. It's this sort of feedback that this series is intended to solicit.
Next in the series is FMF reader RV. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
My wife and I are both 49 and we have 2 teenage children. We have been married for 26 years and live in the Baltimore/Washington DC suburbs. We’ve lived in our house for 24 years and our county provides excellent public schools.
We both have college degrees. I worked in private industry for the first 18 years of my career – Information Technology. For the past 8 years I have worked for the Federal government. My wife worked in private industry for the first 14 years of her career - Accounting. She worked part-time after our first child was born and stopped working for about six years after our second child was born. She has worked part-time for the past 7 years in the public schools.
Recently, I started to pay more attention to financial matters, investments, savings, etc. I wish I had started when I was 22. I love reading financial blogs. We have always lived below our means.
Describe your financial situation.
Together we earn about 125K a year. We have no debt. Our mortgage is paid off and we paid cash for our cars - model years 2000 and 2007. Both cars were bought new.
Our take home pay is about $6,150 a month. This is after all the usual deductions – federal taxes, state and local taxes, FICA taxes, pension contributions, TSP (Thrift Savings Plan) contributions, health insurance, life insurance, CFC (charity) contributions, and HSA (Health Savings Account) contributions. Wow, is there anything I missed?
Most of our expenses are charged to reward credit cards and paid off in full each month. You name it, we charge it. There is nothing unusual about our monthly spending so I won’t list it. We spend about 5K a month. This seems high since we don’t have a mortgage or car payment. I just started tracking our spending using Mint.com to find out exactly where the money goes.
Annual savings (2012):
We were able to max out all tax advantaged savings opportunities in 2012. This year we are eligible for catch-up contributions and plan on increasing our contributions.
- $17,000 in TSP (+ 5% match)
- $10,000 in Roth IRAs
- $1,200 in 529s
- $6,250 in HSA ($1,500 from insurer)
- $780,000 in Retirement accounts (Rollover IRAs, Roth IRAs, TSP)
- $19,000 in HSA
- $40,000 in 529 plans
- $173,000 in Credit Union savings account (emergency fund, new car, home improvements, additional college savings)
- $285,000 house value
What are the current financial issues you're facing?
Saving for college. We plan to pay most of our children’s college tuition. I’ll encourage my kids to attend in-state schools to keep costs reasonable. I want my kids to be financially vested in their college career. I’d love to hear any suggestions you may have. I’ve thought about agreeing to pay all expenses as long as they maintain a 3.0 GPA.
We’ll need to replace our oldest car soon and we have a few home improvement projects we need to complete.
Continue to save for retirement. Now that we are eligible for catch-up contributions we will be contributing $36,000 a year between the TSP and Roth IRAs.
Move all our IRA’s to Vanguard to take advantage of low-cost index funds.
What are your plans for the future?
My dream would be to retire from full-time work at age 56. This is the earliest I would be able to start receiving a federal pension (although it would be reduced). This would be a small pension – about 1K a month. I would then join my wife working part time (16 - 20 hours a week) and we would both fully retire at 62. I’ll also get a small pension from a previous employer when I turn 65.
Realistically, I expect to be working until I’m 62.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
Live within your means. Collect memories not stuff - it’s better for the environment and your finances.