Reader Profile: JJ

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 JJ. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I’m an ISTJ (Myers-Briggs) who prefers e-mail to a phone call and Excel to Word.  I like action.  I welcome problems as long as my “team” is willing to be part of the solution.  I’m not a risk taker and I don’t invest in individual stocks.  I don’t jump in and out of the market and I like index funds.  I don’t like debt.  I am a Christian and I believe family comes before work.  My kids wear second hand clothes, I drive a 13 year old car, and I change the oil in all my vehicles.  I create a balanced budget every year and believe Washington should do the same.  Now with a bit more detail and less character…

My wife and I are in our late thirties and have been happily married for 17 years.  We have three beautiful children (9, 8, & 6) and all are happy and healthy.  We have lived in the mid-west (mostly rural towns with less than 10,000 pop.) and plan to retire here.

My wife has a college degree and has not worked outside our home since our children were born.  Other than a short stent at McDonald’s when I was in college, I have always worked in the health care industry.  My career has taken me from direct clinical (patient care) work to my current position in hospital administration.

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

I am the sole financial provider in the family; however, I think it is important to point out that our financial position would look very different without the hard work and support of my wife.

My income has significantly increased since completing my masters and moving into administration.  My current NET income (I always prefer to work from net) is at $118,999.

Despite my high income, I don’t consider it the “secret” to our financial success; although it has accelerated it.  My wife and I are both very frugal and learned early on how to live below our means.  Over the last 15 years we’ve averaged 20% of our net income going to savings (not including retirement).

Expenses as a percent of net revenue are below.  I tried to keep it simple so there will be some rounding error.

• Savings - 22% (What we’re currently saving to pay off our house)
• Credit Card - 19% (Chase Freedom and it is paid off every month)
• 401k - 12% (Employer 401k close as I can get to maxed without going over)
• Charity - 12% (Church 10% + other non-profits)
• Roth - 8% (Maxed Roth for my wife and I)
• Mortgage - 8% (Will be paid off this year)
• ESA’s - 5% (Maxed ESA’s for three kids)
• Utilities - 5% (Gas, electricity, water, trash, cable, etc.)
• Medical - 4% (Medical, dental, and optical expenses)
• Insurance - 3% (Home, car, term, etc.)
• Other Exp. - 2% (extra for income tax and other small categories)
• Work Exp. - 1% (work expenses are reimbursed but not included in my revenue)

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

Current net worth is just shy of $627,000.  Retirement accounts at $252,000, ESA’s  at $45,000, liquid assets at $98,000, fixed assets (including the house - $65,000 mortgage) $232,000.

I’ve been saving for retirement for 13 years and my Investment mix includes:  50% large cap, 25% small cap, and 25% international.  All, except my 401k, are invested in indexed funds through Vanguard.

I plan to pay off our mortgage in one lump sum in December.  Once the mortgage (5.375% 30 yr) is paid off, and savings is built back up to 12 months expenses, the extra will go towards the “retire early fund”. 

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

I plan to remain in hospital administration until I can retire.  If my calculations are correct (and the market straightens out), I should hit critical mass at age 54.  Like FMF, I am considering an even earlier semi-retirement, but don’t have a good plan right now.  I would love to spend my semi-retirement/retirement helping others learn the power of creating and following a budget.

I would welcome any ideas as to how I can get more experience in assisting others with personal finance budgeting.

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

You where you are financially because of the choices you have made in the past.  If you don’t like where you are, take a good hard look at your choices and make some changes in the future.  No finger pointing or excuses, personal responsibility, accountability, and consistency is key to long term financial success.

Comments

[Bita]

I think you're doing great. If you don't mind me asking, what did you do in direct patient care?

[Jonathan]

Just throwing it out there:

Would you be able to refinance your mortgage? You probably have good credit and I know there are loans under 4.5% now...

[J]

Why would he refinance if he's paying off his mortgage in December?

[Easychange]

Curious what the mortgage total was and what the down payment was. I am just curious to see how far you've come.

[Mark]

Only one suggestion....I'd consider putting some money in bonds...maybe 10% - 25% or your portfolio. It will take some of the volatility out of an all stock portfolio.

Personally, I'm very wary of the US debt picture and am also worried about the depreciation of the dollar. A global bond fund like Loomis Sayles Global Bond (LSGLX) for your IRA is worthy of consideration if you don't have access to a global bond fund in your 401K. Another option might be to just go with a bond index fund or maybe Pimco Total Return if you can get the insitutional share class in your 401k.

[JJ]

Bita - I am/was a cytotechnologist. You can Google it but it is basically a lab tech.

Easychange, et al. - $60,000 down payment on a $200,000 home 5 yrs ago. $90,000 is the remaining amount.

Mark - I understand your point but am also concerned about the future performance of bond investments also. I would like to hear others thoughts as well.

[Old Limey]

Mark:
The problem with LSGLX is that it performed very poorly in 2008 with a maximum drawdown of 20.11% on 10/28/08. One of the better non global funds is TGMNX which invests in government securities and only had a 3.90% drawdown in 2008. Of course with 401K plans the choices are very limited, my son's plan only offers two bond funds, Fidelity's Spartan US Bond Index FBIDX, and Pimco's Total Return Bond fund PTTDX, which are both less volatile and have much lower drawdowns than LSGLX.

[Dee]

@JJ

Is $98K all you have in cash? If you take $90K+ whatever you save between now and then, that doesn't seem like a solid amount of cash to have for emergencies, especially if you live in a small town (limited job opportunities) and your wife hasn't worked in at least nine years (difficulty getting back in the job market).

Or did I miss something?

Overall, though, it looks like you're doing great!

[Dee]

@JJ

That should say if you take $90K to pay off your house in December, plus whatever you can save between now and then...

[TimG]

Wow, I am always shocked at health care salaries. A 120K net income for a hospital administrator in the rural Midwest is a lot of money. I say enjoy it while it lasts, health care isn't going be like that in 10 years. Out of curiosity, what was your masters degree in, and do you feel that you use what you learned or was it more of credential?

[JP]

You're not a risk taker but you're going to just about empty your emergency fund?

[Apex]

Get a HELOC on the house after you pay it off and that will replace your emergency fund. Pentagon Federal Credit Union has free HELOCs, the rates are great, there is zero cost if you don't use it, and anyone can join the Pen Fed by paying something like 20 bucks to become a member of one of the orgs they accept.

[billyjobob]

@ TimG
I work in health care also. Our administators salary was published a few years ago, and it was over 500k per year. This is a Health care system with 4 hospitals and several outpatient sites. About 2000 employees. Still, I thought it was high.

[JJ]

Sorry, typo... I've been paying extra on the mortgage off an on over the last 2 years. The remaining mortgage is $65k. By December I'll have it paid off and $39k left over.

@TimG - My masters is in health services administration and yes it is very important to get the degree specific to health care. Education is important but you also have to be "street smart" and know how to navigate small town politics. They don't teach you that in school. I guess the salary is up for debate, but how much should the CEO of a $20 million dollar organization make? I had the same thoughts when looking from the outside too. Now I understand. I assure you, I earn my money.

$120 net is largely because of my deductions. Three kids, Maxed IRA, mortgage - you get the picture.