Reader Profile: JM

The following is the latest post on my new "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. I need more people to sign up! If you're enjoying this series, you need to contribute to keep it going. Ok, enough begging from me. :-)

Next in the series is FMF reader JM. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I'm female, 23 years old, married, no children.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

My husband and I both work and our total annual salary is about $120k.  We recently moved from a lower cost-of-living area to a higher cost-of-living area due to my husband's job transfer, as well as wanting to move close to family and friends.  Our salaries went up by about $20k total, which covers the cost-of-living increases for the necessities.  We have no debt.

My husband and I keep separate bank accounts.  It wasn't really a conscious decision on our part; it just kind of ended up that way.  I pay him half the rent and utilities every month, and he pays all of those bills from his account.  We take turns paying for food and other items we purchase, but we don't keep a running total.  We still think of it as "our" money even though we have separate accounts.  It has worked out very well for us, as we don't keep any secrets and are both pretty frugal with our money.  If anyone makes a "big" purchase, it is discussed first.  Usually it's not really a big deal as "big" purchases for us are usually only a couple hundred dollars at most and are relatively few and far between.  I'm sure this will change once we own our own home, though.

What are the current financial issues you're facing (saving, paying off debt, etc.)?

Our primary current issue is saving as much money as possible for a big down payment on our first house.  We opted to rent for a year upon moving because we didn't know where my eventual job would be located.  We will easily be able to afford a 20% down payment with our savings, but we want to put as much possible down, get a 30-year mortgage for "insurance" purposes in case one of us loses our job, and pay down as much as possible every month that is left after emergency fund and retirement savings.  Both of us are very debt-averse.  We plan on buying a house well within our means, meaning something that we could easily afford even if one of us unexpectedly got fired or had to stop working for whatever reason.  We hope to pay off the house within 10 years of purchase.  We currently have around $100k in savings, which is kind of a "community" account for all savings, including the eventual down payment and emergency savings.  I'd estimate at least $50k of this will go towards a down payment on the house, and the rest will stay in savings.

I have maxed out my Roth IRA since I started working after college and have a bit over $16k in it.  I am currently ineligible to contribute to my company's 401(k) as I just got this job, but I will start as soon as I am eligible for the company match. My husband has around $40k in his company 401(k) and contributes enough to get the full company match.  I am trying to get him to contribute to a Roth IRA as well, but have been unsuccessful.  My husband is more interested in helping his mother pay down her mortgage so that she can retire.  She is older than the general retirement age and still works full time.  He has contributed several thousand dollars in lump payments over the years to the mortgage.  A good chunk of his income after all necessities are paid for is devoted to this.  His mother has willed him the amount of the mortgage he has paid, plus 1/3 of the remainder of the house's value (he has two siblings that will get the other 2/3).  I am ok with this; until the mortgage has been paid off, I am willing to allow him to do this instead of contributing to the Roth, as long as he still contributes to the 401(k).  His mother has always been very good to him.

We are not too concerned about retirement at this point, as we are young and are already contributing a good amount of our earnings.  Our main concern is getting our house and paying it off as fast as possible.  Once we have paid that off, we will pump even more into retirement and general savings.

What are your plans for the future. (retire early, build your career, etc.)?

My husband and I are both "work to live," not live to work.  We'd love to retire early, but we don't have a set goal at this point.  We plan on retiring out of the country at this point.  Current thoughts on countries include Japan (where my husband's relatives are), Canada, or somewhere in the European Union.  Those places have cost of living at least as high as the US, if not more, so this is a fairly lofty goal.  We are not against doing semi-retirement and I'm sure at least one of us will end up doing semi-retirement.  I'm pretty sure I would lose my mind quickly if I didn't have at least a part-time job!

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

Communication is key in any financial relationship.  My husband and I decided early on in our relationship, well before we were married, to keep all lines of communication open and to be as honest as possible.  This philosophy extends into our finances and it has worked beautifully.  We never fight about money.  Sometimes we have talks about money and we'll disagree about certain things (like my husband putting money into an IRA of his own), but it's never a battle.  You really can't have a good relationship, financial or otherwise, with a spouse or significant other if you aren't willing to be open.

Comments

[Everyday Tips]

Wow, 23 with 100k in savings? Impressive! When I was 23, I just graduated from grad school and had a ton of student loans.

It sounds like you are on very solid financial ground thus far. My only suggestion would be to really look at contributing more to the 401k once you are eligible. That money will really grow over the years, and it is wonderful pre-tax dollars!

[JM]

JM here. :)

The bulk of the 100k in savings is due to the generosity of my family. $45k of it is what my aunt had saved for my college fund, but I ended up not needing it (went to a public school, scholarships, etc), and another decent amount is from wedding gifts. We are EXTREMELY fortunate to have this money, it'll make buying a house much easier. We decided to move up our house search as well.

[tom]

Thanks, JM! Good stuff in there!

Quick question, if you don't mind sharing, is your $120K salary split fairly evenly that you pay half? What would you do if one of you started making much more than the other?

[Jonathan]

Congrats, you guys are in great shape! My wife and I are on much the same trajectory (though a few years past your point). It sounds like you've got a good handle on your spending, and I'd encourage you both to keep that up - consider any bonus, any raise, any way you can save a few dollars on a purchase (or decide not to purchase something) as money saved toward your goals.

Also, and in my opinion this is equally important to achieving your early retirement goals, work on building up passive income. Retirement savings are great, but you can truly retire in confidence if your assets are producing the income you need to live on without having to withdraw "principal."

[Carol]

Wow! You folks should be very proud of yourselves. I believe that there is an advantage of marrying young, because the older you are the more set in your ways you become. You seem to be on the same page. That said, I would still set aside a portion of that $100k toward an emergency fund. If there are any bonuses, I would vote to put in into your husband's Roth IRA. Roths are money machines for the young. The earlier you start to save, the less "make up" money is needed later one. When you finally buy a home, PLEASE DO NOT BUY MORE SPACE THEN WHAT YOU REALLY NEED!!! I can't emphasize this enough. Purchase price is one thing; upkeep is quite another. You didn't mention children; where do they come into the picture (if they do)? Unless you plan to have children soon, you may want to buy something smaller in a good neighborhood then trade up. In any event, keep up the good work!!! Remember, that one step at a time gets you there every time.

[Venkat]

JM, You are doing a great job! Congratulations!!!

[JM]

Tom: It's split more like 70/50, +/- a few thousand. My husband is a bit older than I am, which I think I mentioned in the article, so he makes a bit more. If I continue on in my career I will probably surpass him at some point. It probably won't change our dynamic in any way, unless we have children. We plan on having someone stay at home if we do (it's still an if), and it'd probably be whoever is making the least if it's a substantial amount.

Carol: No plans to have children at this point. We got 3 cats, that's it for now. We MIGHT have children at some point, but it's currently not in the cards. We do plan on buying a smaller house, so I'm right there with you on that advice. The thing is, a lot of the houses in the area we're looking in are a few hundred square feet more than we need. So it's something we're definitely concerned with. We want to keep 20-25%+ of that 100k in an emergency fund even after buying the house.

[Steve]

Congrats on not blowing the $45K on/in school. If you're that smart in your decisions at 18 you're going to be a financial guru at 30...

[BB]

Where are good places to meet fiscally responsible individuals (read: women)?

:p

[JT]

Congrats!

You're in much better shape than your peers, and it'll only be a few more years that compound growth and smart planning start paying off big. It's encouraging to see people who have made very good decisions like you have in your personal finances.

[TJ]

I'll do a reader profile, but I don't see any contact/e-mail links...lol

[Jim]

JM, combine your accounts, combine your accounts, combine your accounts.

[Tony]

JM. You are doing very well, keep doing what you're doing (don't combine your accounts). My only advice would be to split expenses using the same income ratio (70K/50K) instead of 50%/50% like you are doing now. This is the fair way to do it. Your husband should pay for 58% of household expenses (70K/120K) and you should be responsible for the other 48% (50K/120K).

[JM]

@Jim: Our savings account (the one with almost all of the $100k) is indeed combined. Our checking is not. But those consist only of direct deposit being used to pay day-to-day expenses. All savings goes in the savings account.