Reader Profile: RK

Here's an interview with an FMF reader about her financial situation.

My questions are in bold italics and her responses follow in black.

Let's get started...

Please tell us a bit about yourself.

I'm a single 34 year old female, still living in the Midwest. I’ve been part of the institutional marketing department of a university for 7 ½ years now.

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

I bought a townhouse-style condo in April 2010 and refinanced from a 30 year fixed mortgage to a 15 in October 2012. After another 2 years of payments with additional principal, motivation hit and I decided I wanted to ditch the mortgage ASAP. It meant liquidating most of my $26k taxable investment account (I know, I know… it was mostly cash at the time at least), taking a chunk out of liquid savings, and being extra vigilant about spending. The last payment was made in August 2015. I used the rest of 2015 to build up my savings account again and complete a few home upgrades - new flooring in 2 rooms (paid for from savings) and a furnace and air conditioner upgrade (paid for by an inheritance).

As of January 1, 2016, I’m maxing out my 403(b) ($18,000) and HSA ($3,350). My Roth IRA ($5,500) was maxed for 2016 as of January 2. My employer also contributes 12% of my salary (~$7,100) to my 403(b). Combined, it’s the equivalent of 57% of my salary. It might be overkill, but why not while I comfortably can? :)

Income: I take home about $2,300/mo after all deductions. Checking and savings interest is another $50/month. I also have an inherited IRA, and this year’s RMD is a little over $1,360 before taxes.

Monthly Expenses -- Typically average around $925/month, broken down as follows:

• $160 condo dues. This includes water, sewer, trash, lawn care, and snow removal.
• $250 the rest of my household bills - TV, internet, cell phone, electric, gas.
• $65 auto: gas and maintenance. (In non-snowy months, a tank can last almost 2 weeks.)
• $250 food/household items
• $200 miscellaneous: clothing, personal care, fitness-related expenses, entertainment, etc.

Property taxes ($2,300/year), auto insurance ($550 every 6 months), and condo insurance ($240/year) come out of savings as they come up.

Assets as of 9/30:

• $38,600 liquid checking and savings accounts
• $127,000 403(b) at Fidelity
• $109,000 Roth IRA at Vanguard - includes a converted 401(k) from a previous employer
• $71,000 inherited IRA at Vanguard
• $150,000 estimated condo value (as of July 2016)

Debt: No loans, credit card balances or other debt. Credit cards are paid off monthly, and almost always before the billing cycle closes.

What are the current financial issues you're facing?

Within the next 6 months:

1) I’m considering a new vehicle by spring. (I definitely don’t want a new car just before or during winter here!) I currently drive a 2009 Toyota Corolla XRS - bought new in Sept. 2008, paid off within a year, obviously very reliable, and has only 55k miles on it. The biggest reason to upgrade would be for new features, safety and otherwise. If I do move forward it will be purchased.

2) I’m getting estimates to replace the remaining 3 windows in my condo. This is also not immediately necessary, but the originals are very much “builder grade” and I’d like to finish the project. (I did the others a few years ago out of necessity.)

3) I haven’t shopped for insurance quotes lately. Michigan is the most expensive state for auto insurance so I’m not sure if I can improve, but it’s worth a shot.

4) I'm considering changing gyms. My current gym is decent for what it is, conveniently located and reasonably priced - but now that I'm consistently in there to lift weights, I'm finding it's lacking in some areas. (A few of my friends around the world are competitive powerlifters. Perhaps they're a bad influence?) :) This would probably increase my budget by $30-35/month. After an upcoming business trip, I'll have time to investigate further and get a 7 day trial pass at the one I'm considering.

What are your plans for the future?

Continue to transfer all leftover (after bills are covered) money to savings. Most months this is between $800-1,200.

Kick-start the taxable account again once I make decisions on the windows and vehicle. I’d rather make a decent initial investment - $5k at minimum - as opposed to small amounts.

Continue to max out my retirement accounts as long as possible. It’s a good chunk of my paycheck, but I haven’t missed the money so far. I still can take vacations, attend big-name concerts, etc. and add to my savings.

Financial independence is a goal as well, but that’d be years down the road.

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

I’m a big fan of keeping a net worth spreadsheet. I enter balances for everything in a Google spreadsheet at the end of each month, and include short notes like “Market down”, “Property taxes due”, or “Took RMD” for reference. This has proven to be very motivational over the last 5-6 years. I really want to hit $500k by my 35th birthday in November!

Also, probably 18 months ago, I overhauled my portfolio and adopted the Boglehead way of investing. My overall portfolio now has an average expense ratio of 0.11% - extremely low! My investments are mostly self-sufficient; my 403(b) contributions keep the ratio I want, but I still log in occasionally to double-check and rebalance as necessary.

And I’m still a diehard Quicken user for keeping track of all my transactions and budgeting!

Comments

[Chadnudj]

Wow. Impressive - seriously, you're in excellent shape!

I would say to hold off on the car upgrade -- it sounds like your vehicle is perfectly reliable, has low mileage, and the safety improvements from a 2009 model to a 2017 model are likely to be minimal. If anything, I'd spend to have it fully and thoroughly inspected by a qualified mechanic to make sure all belts, hoses, fans, gears, and filters are in excellent working order. A 2009 car should, at minimum, get you through 2019, if not beyond given your low mileage and the fact that most Toyotas work far beyond 10 years/up to 150k miles. (That being said, if you want a new car, you certainly can afford it...it just doesn't appear necessary).

As for the windows, they're a good investment towards making your home more energy efficient I'd imagine, and increasing the resale value, so go ahead. And for the gym -- you're friends with powerlifters, but do YOU want to be a powerlifter? If so - change gyms. If not, it seems like you have everything you need in your current convenient, nice, and more affordable gym.

[Indio]

You're making excellent financial progress. You should target financial independence as a 5-7 year goal. If you keep your spending at the same level, it is doable. Wouldn't it be nice to only work if you want to?
The car and gym sounds as if you are looking for a reason to justify spending money. Your property taxes and insurance will increase with a new car. I have a Toyota too and I'm hanging on to it till it hits 150k miles because cars are a depreciating asset.