Reader Profile: Jen

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.

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

Please tell us a bit about yourself.

I'm 27, married (husband is 28) with a 1 year old child.  We currently live in the beautiful and relatively cheap state of Kentucky, in one of the largest cities in the state.  I work full time managing the external marketing for my company.  I have a duel BA in Marketing and Business management from a state school.  My husband also works full time leading a client relations and sales team for a large international organization.  He has a BA in Account and Management from the same state school as me as well as an MBA from larger state school.  Both of us are fairly secure in our positions.  I recently changed jobs resulting in a 30% increase in my salary.  My husband is hoping that recent changes at his job will results in a promotion for him as well at the end of the year, but at this point there isn't anything concrete.
 
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

As mentioned above, we both work.  My career has progressed a little quicker than my husbands and I recently began a mentor ship with my company's CEO to help in furthering my career.  My husband's career has been steadily growing, but he has not been paid to market value which is a big issue for him.  He has looked for other jobs but unfortunately the local job market isn't huge and hasn't produced any jobs in which he's interested or qualified.  Collectively, we bring home approximately $5K a month after taxes, 401K, and pretax dependent care benefits, and health insurance. 
 
We own our home, but not by much.  We were young, naive, and ill prepared when we purchased our house.  We put nothing down (although we thankfully were smart enough to not agree to an adjustable rate ARM, even then) and had to take out an extra $5K to cover closing costs and immediate repairs we wanted to do.  Originally our mortgage was for $123K and we have paid it down to roughly 116K in the 4 years we've lived there.  Fortunately our house is very close to the local university as well as a very popular area of town, so homes tend to the turn over quickly.  We estimate that with the upgrades we've completed (Brand new main bathroom, updated kitchen, original re-finished hardwood floors) we could conservatively sell the house for $130-$135 today.
 
We currently have a car payment on one of our cars, but will pay in off in about a year.  Our other vehicle is 12 years old, paid for and in good condition.  Our bills (including mortgage and car payment) account for about 65% of our take home pay.  We are currently paying too much for cable (a must to keep my sanity) and internet (a must for both of our jobs), but we are currently research competitor companies that we can switch to.  Our electric varies greatly due to our older home (they didn't believe in insullation in 1920) so that could range from $87 to $350 a month depending on the weather.  Childcare costs us roughly $520 a month.  We also tithe 10% and save 10%.  The remaining (what little there is) is used for discretionary spending. 
 
We recently paid off all our credit cards (using some money from savings) to eliminate those payments but still have my husband's graduate school loans to pay off - approximately $10K at this point. 
 
Our savings is not ideal, but we're working on building it up.  We currently have a little over $5k in liquid saving.  Combined we have close to $13K in 401K.  My husband contributes 6% and receives a max match of 6% at his company.  I have not been able to contribute to my 401K in the last 6 months due to my recent job change.  At my new company, when I'm eligible, I will contribute 6% as well, but they only match a max of 5%. 

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

We have recently overcome all our credit card debt, but realize we're really behind on savings. We struggle with finding the right balance between aggressively paying off debt while sacrificing savings (my husbands idea) or continuing to save while paying off the big debts (student loans, car, and home) at little at time (my plan).
 
Also, we both work really hard and pre-kid had the mind set of rewarding that hard work.  Basically if we saw something we wanted we bought it.  Unfortunately that state mind netted me a closet full of really expensive shoes and purses, but little else to show.  Now we are working to build a better financial future but sometimes feel like we're working for the future and not really enjoying some of the "fruits of our labor" now.  So finding that balance is also a struggle.

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

We plan on having another child in the next 2 years, but recognize that we to free up additional cash each month to cover the added daycare expense as well as the general expenses that come with a baby. With that, we would also like to purchase a larger home in a better school district.  Our current home is very cramped (as traditional 1920's bungalows are) and doesn't really work for our expanding family as there is very little open space besides our son's room.  We are also next to a very busy road, behind a restaurant and under the airports flight path, which creates a less than ideal outdoor situation.
 
As far as careers go, we both are interested in continuing to advance.  My husband would like to climb the ladder, but is still struggling to figure out which industry and type of role he's interested in (operations vs sales/client services).  For myself, I have big aspirations of becoming a CEO (thus why I'm now being mentored by my current CEO).  We both would like to be in a situation where we could retire from full-time corporate work in our 50's.  We both would then like to continue working part time in consulting or teaching for a few years before completely retiring. 

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

"Pay God and yourself first"  It's a hard one to do but worth while if you can establish routine.  For years, we never tithed and always would plan on putting whatever was left at the end of the month into savings.  Shockingly, by the enough of the month there was nothing there to save.  I set up an automatic transfer from my checking to my savings each month, and never have to think about it.  This is the ONLY reason why at this point we have anything in savings.  As for tithing, we finally reached the point where we felt convicted to do so.  I will be the first to admit that each month writing that check hurts because I can always think of ways that it would benefit us (like additional savings, paying debts, etc.)  However, in the time we've been faithfully tithing, we've not missed the money and are finding that when we need something, there always seems to be money for it, even if it's something fun like dinner out.  Our belief is that we've been so blessed, it's our duty to share some of our wealth to help out others.

Comments

[JP]

Emergency savings are a little low.

Can you guys contribute to a Roth IRA? Might be worth investigating if you're not getting quite as good of a 401k match.

Sounds like you both are playing good offense!

[Rick Francis]

It sounds like you know where you need to focus I have a few suggestions:

#1 Don't buy too much house- that can be a big drag on your finances. However, it sounds like a different house would be worthwhile, especially avoiding high traffic. We live on a circle and have almost no traffic- it makes it much nicer for the kids.

#2 Since automatic transfers have worked well for you in the past ratchet it up to save the amount you want to save. Once your savings is taken care of then you can spend the rest without worrying- just don't spend more than you have.

#3 Paying off debt is also an investment- I would look at the interest rate on the debt. If it is a high rate (say 6%+) then pay it off first. If it is low interest (less than 4%) don't pay it off early, you are likely to do better by increasing your retirement contributions and investing the money. If it is intermediate pay a bit extra but balance it with other savings.

-Rick Francis

[tom]

Great stuff, Jen.

Thank you for sharing.

[Luis]

Giving your money to a good cause should feel good, it should also be the #1 reason why you give. If not, then i'm confused the yin and yang of why a) it pangs you before you write the check and b) not missing the money that you do give after you write the check. HUH? :/

I'm not saying to stop giving, but to shift your perception a bit. If you still hurt emotionally after all attempts, then I'd say giving may not be right for you at that moment.

I'd sell the house and get something bigger and in a safer neighborhood for your future kids. This time work on a 20% down payment. Is there such thing as an interest only mortgage these days? If so, you'd be a good candidate as you'll afford more home for less monthly payments. Once you get the CEO position (higher salary), you can then pay down the principal on the loan. Don't buy a home that is more than 28% of your salary.

[Leigh]

@Luis, "Don't buy a home that is more than 28% of your salary."

How is anyone supposed to find a house at that price? I can't think of anywhere that I could find a house that would cost only 28% of my salary and I make six figures. Any houses that I would be looking at would be between $200,000 and $350,000, so nowhere near 28% of my salary.

[Luis]

@ Leigh Sorry I meant to say 28% (of the monthly mortgage) compared to your (monthly) salary.

[jim]

"Our electric varies greatly due to our older home (they didn't believe in insullation in 1920) so that could range from $87 to $350 a month depending on the weather."

You might want to check to see if your local utility (or city or state) has any deals for an 'energy audit'. Many utilities offer audits to help people find out how to cost effectively improve their energy efficiency.

It doesn't sound like you plan to be in that house for a long time so I wouldn't spend a ton of money. But you might find that some cheap, easy fixes will save you enough energy in the next couple years to be worth it.

[Jen]

Thank you everyone for the feedback!!

@Luis - I mentioned the pang of writing the tithe check only because, like many people, the very practical side of me and always think of a number of ways I could use that money - however, I do so gladly because of my faith and belief of giving back. I think it's something a lot of people struggle with.

@Jim - Ironically both of my parents have worked in the utilities fields for years and my father also has built homes on the side - so he did an engery audit for us when we bought the house. We've installed new windows, sealed any leaky door ways and added insulation in all the spaces we can.

[Carol]

Jen, You and your husband are doing a nice job. You may not like my advice, but here it is: before you have your baby beef up your emergency fund. With your husband's and your careers, are you considering a move out of Kentucky? If so, I wouldn't buy another house in the area, as you might move. I also agree with one of the bloggers to start Roth IRA's; RI's are money machines for folk as young as you and your husband. Finally, wait until you have a second baby to move. You're going to have bigger expenses with daycare. Good luck to you and your husband, and may you have a blessed holiday season.