Free Money Finance

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!

Reader Profile: KP

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 KP. She answered my questions (in bold italics below) as follows:

Please tell us a bit about yourself.

My husband I are both 36.  We have been married about 18 months; this is the second marriage for both of us.  Between us, we have 3 elementary-school-aged children.  We do not plan to have any more.

I graduated with no student loans and have been working for 14 years.  My husband dropped out of college after a year and has been in his industry for almost 15 years.

We live in a suburb of a large city in Texas, which has relatively low COL, no state income tax but really high property taxes.  We moved to this particular town last summer (from a small town 50 miles away) so that we would be closer to our childrens' other parents and so that I would have the option to pursue other job opportunities.

Describe your financial situation.

Income:

I am in IT and make $105k per year.  I changed jobs last month.  The new job cuts my commute time by 15-30 minutes per day, has a higher 403b match, offers more room for advancement, and is allowing me to learn a new and highly in demand technology.  However, I took a 3% pay cut, now have to pay tolls, and am no longer eligible for a bonus (averaged 4-12%) or a pension.
 
My husband is an auto tech and makes about $36k per year.  He has been at the same very small shop for over 10 years; they offer no benefits.
 
I receive approximately $22k per year in child support for my biokids.   This will decrease in 10 years and go away completely in 13 years.
 
After taxes/deductions/403b, we net about $8200/mo
 
Annual Savings:

We are currently saving about 20% of our gross income each year. Currently, this breaks down into:

• 403b: 8.5%  (13% of my salary.  My employer will match 6% dollar-for-dollar after 2 years of service. )
• Roth IRA: 4.375% (max out H's; $1500 for mine)
• Brokerage Account: 1.5%
• Short-term Savings (cash): 2.25%
• College funds: 3.625%

Of this 32k, 4k is deposited into the college funds in January when I reimburse myself from the dependent day care account (pre-tax money). Since the 403b contribution is also pre-tax, the rest of our contributions add up to about $1233/month out of our net pay.
 
Monthly Expenses:
 
Fixed expenses:

• Child support for his bio child: $250;  this will end in 11 years
• Mortgage (incl ins and taxes): $2000
• HOA: $40

That leaves about $4600 for the rest:

• Day care: $1000 (average: more expensive in summer/holidays, less during school)
• Automotive (tolls, gas, insurance, maintenance): $700
• Utilities: 335
• Cell phones: 120
• Satellite + Netflix: 120
• Internet: 65 (high speed internet is necessary so that I can work from home occasionally)
• Groceries/eating out: $850
• Children's extracurriculars: $170
• Medical:   500 (we had a high-deductible plan through June; now on a more normal plan)
• Gym: $50
• Children's allowances: up to $50, depending on how many chores get done
• Extra life insurance: $70 [extra $500k for me, $150k for him; through my company I have $50k on him and 4x my salary]
• Home Improvement/Entertainment/Clothing/vacation fund: up to $600

If there is anything left over I transfer it to short-term savings.
 
Assets:

• $230k in rollover IRA
• $20k in Roth IRAs
• $56k brokerage fund
• $15k cash emergency fund
• $5k cash short-term savings (currently earmarked for a new car; ours are 8 and 9 years old)
• $1.5k in HSA
• $1k in 403b

Our home is worth between 215-250k.
 
We have $43k saved in Coverdell ESA and 529 plans for the kids' college. My xH is supposedly also saving for our two children.
 
I will get a small pension from my last job; it is calculated to be about $1600/mo if I start drawing it at age 60 (or $200/mo if I start drawing now).  The monthly payout is locked in when withdrawals begin.
 
The emergency fund may seem low but it will cover the rest of our essentials for 6 months if I were to lose my job.
 
Debt:

• Mortgage: 162k left at 2.625%; we have 14 years remaining on a 15-year mortgage

Last year we paid off all other debt  :)
 
What are the current financial issues you're facing?
 
I started tracking our spending in January to see where the money is actually going.  In the first 7 months of the year we are averaging about $600 over budget each month but our income easily covered that.  With my new reduced income (less pay + tolls!) this is not going to be acceptable.  Some of these were unexpected medical expenses, which should be greatly reduced next year on our new health insurance plan.  Other overages were related to the new house (landscaping, setting up our media room, etc)...but we have a list of small renovations we would like to do, so I can't just assume those types of costs will magically go away.  
 
We are considering pulling $40k from the brokerage account as a down payment on a house that we could rent out.  There is a 3-year-old home down the street from us that is in foreclosure and only needs about $5k to make it ready for renters.  I estimate we could net $5k per year after the mortgage, which should cover current maintenance costs/future maintenance fund and leave a cushion for times when the it is empty.  That house would also be an option for us to downsize into when our children are out of the house in about 20 years.
 
I also don't think we are allocating our savings in the right way.  I'm debating putting less in the 403b and instead maxing out my Roth IRA...or maybe putting more money into the brokerage account.  I'm also considering closing out the HSA since I can't contribute to it anymore and repay myself for all the medical bills accrued this year (money would go into the car fund).

What are your plans for the future?

My job change gives me a lot more opportunity to grow my career.  Within 3 years I will be an expert in a field that is growing by leaps and bounds.  I'll either be able to parlay this experience into a higher-paying opportunity elsewhere, or I will be able to move around - and preferably up - within my current company.

I would like to pay for 100% of the children's college tuition/fees/books (at a public university).  For housing, they can live at home, get scholarships, work, convince their other parents to help, or take out loans.

My husband is likely going to have to stop working in his current career by the time he is 55.  At that point, he may segue into more of an office/sales type job, but that is not guaranteed.  I would like to retire, or at least work part-time, at 60.  We plan to stay in our home for the next 20-25 years and then downsize.

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

In my first marriage, I trusted my husband to be in charge of all the finances.  I knew where the money was and what it was invested in and was content to ignore it.  That was dumb.  I ended up a single mom with half the assets and no idea what to do with them...and no idea how much I was actually spending each month or how to live on a budget.   I did a LOT of reading (including blogs like this one) to educate myself.  Even if you aren't the money handler in your relationship, make an effort to sit down once a month or once a quarter and discuss everything with your partner.  Not just where the money is, but WHY it's going there and HOW that decision is helping you meet your mutual goals.
 
In that vein, I am teaching my children about money matters - they get allowances and have bank accounts and college funds, and we go over the statements with them every quarter.  When we go on vacation, we match whatever money they save during a certain time period and that is the only souvenir money they get. The 5-year-old does an excellent job at budgeting and assessing value; his sisters are getting there.
 
I have a 5-year plan for my career at any particular company. I don't want to plan much longer than that because there are so many different kinds of opportunities; what I am doing now I never would have really imagined when I started working 14 years ago.  I've learned that if you haven't reached that goal in 5 years, it's time to move on to a new job, develop additional skills, or look for a different kind of opportunity.  I absolutely do not regret walking away from the money from my last job; as hard as it was to leave the pension behind, in the long run I will be much happer in the new position and have the potential to make a much higher overall salary.  There was no room for advancement in my previous company.

Reader Profile Update: CM

The following is an update from reader CM. He shared his reader profile with us last year.

Since this post, quite a bit has changed.  Most notable difference has been that I have a daughter now that will turn 1 at the end of this month (crazy how quickly that happened).  Having a child has definitely been awesome, but it has certainly affected the finances and our priorities going forward.

The most difficult (significant) obstacle to-date has been daycare.  Due to the fact that we have been on the waiting list at several daycare facilities for almost a year and a half now, we are still paying for a private nanny who watches our daughter at her home along with 2 other children.  Cost for this is $1,730/ month.  Ouch. Sounds absurd but it actually works out to around $8.50/ hr for the nanny which isnt much.  We have friends that pay $2,400 so I guess it can always be worse. Once she gets into normal daycare this should decrease to around $1000/ month.  We are thinking this will finally happen in August based on the last update we received.

To help combat the quickly escalating child cost situation, I have tried to get child "running costs" as low as possible.  Thanks to Amazon.com and their "subscribe and save program", we are saving quite a bit on diapers, formula, baby food, and other household items (typically more than 20% off of retail prices).  Best part about it is that it keeps the wife out of Target (which is guaranteed to be $100/ visit)!

We also moved to a bigger place this past February which was one of the future goals in noted in original post.  With this move, rent has increased from $1,225 to $1,750.  The extra space was sorely needed however, and now we are in a place where we can stay at least a couple years if needed.  The extra bedroom for the in-laws when they visit (crucial for having occasional nights off!) has been huge.  I will admit we also splurged on some furniture (and a Weber grill now that we're allowed to have one - manhood restored!) after moving in which set us back quite a bit more than I wanted, but hopefully this will severely soften the move-in expenses blow when we finally buy a house.

I won't go through the entire monthly budget, but post child expenses have clearly risen.  With additional rent, baby food/ supplies, and daycare, expenses have increased around $2500/ month (very painful to go through the numbers and see just how much we spend monthly).

Fortunately, income has risen a little bit as well and has helped offside our rising costs.  I was able to max out my bonus last year, but came up just short of hitting my profit share goal (hoping to hit both of those this year).  Gross income last year was right at $200K.

With the increase income, I was finally able to pay off my car, and get the wife out of her leased compact sedan and into a small SUV that offers ALOT more room for baby stuff.  I also put quite a bit more into the emergency fund and now have it fully funded.  In addition, we have started a house fund, but it will certainly take some time to get that where it needs to be.

I was also able to finally make some progress with retirement planning.  I had a rep come in to present their SIMPLE IRA plan to my boss and I earlier this year and am basically waiting to hear if/when it will be implemented (has taken much longer than expected).  If this never happens, I suppose I will keep increasing wife's contributions until she is maxing out her 401K yearly.  In the meantime though, I went ahead and set up a Roth IRA for myself and contributed the full $5500 (our AGI was under the $178K threshold).  I also created a 529 account for my daughter and will make yearly contributions to that.  I bumped the wife's contributions to 8% and plan to max my Roth for as long as my income allows (hopefully not much longer!).  All holdings are now Vanguard index or bond funds with a few international funds mixed in.  The expense ratios on wife's 401K holdings were obscene (same as high at 1.5) so I'm glad I took the time to learn about it and make the switch.

Somewhat recently I set up long-term disability insurance for myself also.  Now, if I inadvertently lose a leg while working at my desk, I will get $5K/ month tax free.  As for life insurance, my wife was a $1.5 mm 30 yr term life insurance policy on me, and I have a $500K 30 yr term policy on her so we should be all set there.

Last big item that we changed was my wife's health insurance.  We moved her from a higher premium, lower deductible plan to their lower premium, higher deductible with HSA plan.  I cancelled my plan through my work and now my daughter and I are on her plan as well.  Due to the great incentives they offer (sign up bonus, bonus for healthy living, and 1:1 match on contributions up to $750) and the fact that we are all pretty healthy people this has worked out really well.  We are paying about the same as we were before in monthly premium, but have the benefit of the HSA. Pretty funny though as many of my wife's coworkers (and even some of the doctors in her group) told her she was insane to go this route.

Assets/ liabilities as we stand now:

Assets

• Emergency Fund: $30,000 ($14,000 increase)
• House fund: $15,000 ($15,000 increase)
• General savings: $1,000 ($0 increase)
• Wife 401K: $38,500 ($8,500 increase)
• Condo: $120,000 ($5,000 increase estimated... market finally starting to recover)
• My Roth IRA: $5,700 ($5,700 increase)
• Daughter 529: $1,100 ($1,100 increase)
• HSA: $1,750 ($1,750 increase)
• My car: $18,000 ($14,000 increase)
• Total increase: $65,050

Liabilities

• Wife Car: $16,000 at 1.99% ($6,500 increase over total of payments owed on previous leased vehicle)
• Mortgage on condo: $136,000 at 4.25% ($2,000 decrease... I pay a little extra on it each month)
• Credit Cards: $0
• No other debt
• Total decrease: $9,450

So all-in-all it was a pretty good year as we increased our net worth by around $75K.  If I count vehicle equity and the cash value of my wife's pension (prob reaching here!) we are finally on the verge of cracking the $100K net worth mark.  Looking at net worth is definitely something that I focus on way more than before.  This is probably partly due to time spent on the Boglehead forum where I have learned quite a bit - the general consensus there is that the first $100K is always the hardest - amen to that!  Luckily, Mint has finally added this feature so it is very easy to track now.  After we clear the first $100K hurdle, the next goal will be $250K (then $500, then $1 mm).  Good to have goals!

Although I still feel that we are WAY BEHIND where we should be, it is good to see progress.  Writing this all down I am actually pretty surprised to see just how well we did over the past year, especially in light of daycare just killing our bottom line (this has been a big source of stress for me over last year but my wife LOVES our nanny so it is tough to change anything).

We have definitely gotten a little bit looser on our budget recently (need to reign that in again) but we still take the time to actually do a budget each month which I still think has been huge for us.  Biggest benefit is that there are no surprise purchases by either of us which definitely helps keep stress/ resentment out of our relationship.

My biggest challenges now is trying to decide where I want to go with career (I am kind of maxed out where I am now with nowhere to go since I am essentially the GM of our 6-person office) and when we want to purchase a home.  To be honest, I am seriously considering putting home purchase on hold for a while and snapping up a rental property here in Charlotte in the $30-40K range by end of year.  Wife isn't quite sure what to think about that idea yet.

In short, real estate is still how I want to make my retirement (and hopefully one day a full-time job) and I feel a strong sense of urgency to get started ASAP.  My condo in Savannah is doing fine and has required minimal maintenance.  The current tenant just renewed and I was able to raise rent a little bit again.  Property values there are also starting to come back, so hopefully within the next 2 years I will be able to get out of that property.

Just for reference, I currently owe $136,000 on a 30 year fixed at 4.25% and net $1080/ month in rent after mortgage, POA fees, and management fees.  As I have learned more about real estate investing, I have come to realize that the numbers here don't really work as an investment so most likely I will be looking to sell it if/ when I can.  For those interested, I have spent a fair amount of time on Biggerpockets.com reading and learning from others - pretty good resource for real estate investing.

Once we are ready to purchase a home in Charlotte, I plan to put at least 20% down on a 20 year fixed rate mortgage.  Will take some time to save enough to get there though.  I have absolutely no interest in stretching to get in a house quicker by only putting 5-10% down on a 30 year.  So time is definitely on our side here.

So that is pretty much about it.  For anyone willing, I would love to hear input as to how you think I'm doing and what I can possibly improve upon.

Reader Profile: GL

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 GL. She answered my questions (in bold italics below) as follows:

Tell us a bit about yourself.

I am a 20-something personal finance enthusiast, who makes no secret of her love for food, reading, and Pinterest. I work as an accountant at a hotel and live in St. Louis, MO. I am married to an awesome guy, who happens to stay home with out 5 month old, and we have a three-legged dog named Max!  My blog, Retired by 40!, tracks my progress towards retiring by 40.

Describe your financial situation.

I work as an accountant, my husband stays home with our daughter, but he attends school and drills with the Illinois National Guard, so he bring in money for going to school and drills.  I am not shy about sharing everything on my blog, so I'll do the same here!  Our after-tax income is $3,800 per month, and we break down our budget this way:

• Mortgage - $635
• Utilities (including phone & internet) - $300
• Vehicle Payments - $920
• Gas - $300 Insurance - $80
• Health/Life Insurance/Doc Bills - $313.33
• Anything bought at Walmart - $300
• Haircut - $20
• Entertainment - $8
• Savings - $150
• Student/Personal Loans - $620
• Total = $3,646.33

This leaves a bit of wiggle room for a meal out every other month or so, as well as small home maintenance issues and other things that inevitably pop up.

What are the current financial issues you face?

We have a personal loan that we are paying $500 per month on right now.  The balance is sitting right around $9,000, but because it is from family, we would like to get it paid off sooner rather than later.  Next on the list will be the huge car payment.  $670 of it is for our SUV (bought after the baby was born....) and $250 is for my husband's ATV.  Don't just me too bad on these!  They were impulse purchases that I made while swimming in hormones, and now we're paying the price :-)

Right now - even with our debt, our Net Worth is sitting at $51,025, give or take depending on the day, so when you consider that we're only 23, I feel that we're doing pretty well.  We bought a HUD home valued at 3x what we paid for it, so I feel that we did pretty well there!

Phase 1 is paying off debt and we're plowing through that as much as possible right now.

Phase 2 is moving out of our current home and turning it into rental property - yay passive income!

Phase 3 is saving and retirement - Hopefully by 40!  Right now we're on track, but who knows what the future holds!

What financial advice do you have for FMF readers?

Use the future value of money method to help stop spending money.  For example, $20.00 at McDonald's on a quick meal is the same as $300 in retirement!  Makes you want to go eat at home, right?

Also, it is never too late to start!  Just because you partied away your college years that doesn't mean that you have no chance of retiring early.  All it takes is some creativity and hard work!

Finally, be aware of your impact on future generations.  Are we setting a good example for our children and grandchildren?

Reader Profile: KR

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 KR. He answered my questions (in bold italics below) as follows:

Please tell us a bit about yourself.

I am a single 30 year old male. I was born in Eastern Europe and spent my childhood moving back and forth between the US and my birth country as my parents worked in academia and had several visiting research positions in the US. I ended up going to college at a small liberal arts college in the Northeast, followed by grad school in a larger city where I got an MS in computer science.

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

I started working right out of grad school as a software engineer, which I've been doing for just under five years now.  I've seen steady increases in income since I started and have tried to keep my lifestyle and expenses about the same as they were when I was a student. I was lucky to have fairly low student loan debt from college (about $18k, all paid off now) and none from grad school as I had an assistantship.

My initial knowledge of investing came from a very handy booklet I got as part of my college graduation package that succinctly explained things like bonds, index funds, tax-advantaged accounts, and so forth. After reading up a bit I started perusing some personal finance web sites, including FMF. A year or two ago I started reading the blogs by from Jacob at Early Retirement Extreme and Pete at Mr. Money Mustache and thought they were quite good at articulating and improving my approach to personal finance.

I used to have a budget to develop reasonable spending habits but I haven't felt the need to follow a specific plan in the last few years. My monthly expenses are roughly as follows:

• Rent and utilities: $550
• Food: $600
• Transportation (subway pass, car insurance, gas): $200
• Entertainment (event tickets, drugs, media): $200
• Travel (transit, lodging, meals): $150
• Gifts & charity: $200
• Health insurance (employer plan): $150
• Miscellaneous (furnishings, personal care): $200

This comes out to about $25,000 in spending per year. My gross income was $100,000 at its highest but my current job is with a small startup and includes a substantial equity component as well, so I'm 'only' making $80,000. I have also recently started working part-time for my previous company at $110/hour for 5-10 hours a week, which would provide another $2,000 to $4,000 gross monthly income, but it's unclear how long this contract will go, so I consider it a bonus to be donated/added to my savings. My full-time monthly take home is just over $4,000 (no 401k) of which $2,000 is automatically transferred into savings.

My current net worth is about $120,000 and is spread across a traditional IRA ($40k), Roth IRA ($20k) and a regular brokerage account ($60k). I have no debts and no significant assets outside of these accounts, especially since my hot tub broke last year (a sad day for a lover of warm climes living in New England!) I own a car that could probably fetch about $2,000 if I suddenly needed more cash.

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

I feel pretty good about my finances although the cheapskate in me is always looking for ways to cut expenses. The most obvious place to do this is in the food budget - I don't know anyone else who spends more on food than on rent! I'm a 6'6 guy with a lightning fast metabolism and consume 3,000-4,000 calories a day, so part of it just comes down to quantity, but I'm also pretty lazy about cooking and eat prepared meals a fair amount.

The other thing I need to figure out is properly investing my savings. My target allocation would be about 40/40/20 into broad-based US, international, and bond index funds at Vanguard (VTSAX, VTIAX, VBMFX) while keeping $10-$15k as an emergency fund.

Due to my equity index funds being sold when I left my last job and rolled everything over into my IRA, most of my assets ended up in cash and instead of buying back in right away, I figured I'd wait a bit to 'buy a dip.' This was in the fall of 2012 so I've been waiting ever since. I have now started dollar-cost averaging back into index funds, and chalking up missing out on the 20% gains of the past 12 months to learning the lesson of not trying to time the market. Hopefully I won't make a mistake like that again and will be disciplined enough to stick to the plan.

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

My job is pretty fun, but I wouldn't want to rely on it for survival for decades, so my long-term financial goal is to accumulate enough net worth to transition as quickly as possible to relying predominantly on investment income for my living expenses. I doubt that would mean I'd stop working entirely but it would definitely put my mind at ease and allow me to pursue interests without worrying about the financial aspects too much.

It's hard to estimate how long that will take, but my back of the envelope calculation goes as follows: assuming a 4% safe withdrawal rate and assuming inflation is a wash (affects income and expenses equally) my current lifestyle of $25k/year in expenses requires $625k in capital to sustain indefinitely, i.e. I need to save $500k more. If part-time work and/or future raises cover my living expenses (as they currently do) and I can save the full $4k from my current salary each month, this would take about 8 years assuming a conservative 4% growth rate.

I'm hoping both to grow my income and reduce my expenses to shorten this time a little more, but obviously lots of unforeseen events could lengthen it as well. The biggest risks I see are (1) increase in health care expenses as I currently pay almost nothing other than my fairly cheap premium; (2) increase in housing costs as my current rent was below market when I moved in and hasn't been raised in five years; (3) stock market stagnation leading to low investment returns; (4) wanting to help out my parents (both early 60's and in pretty good financial shape). I am especially interested in hearing readers' counterarguments to my logic above; if I'm obviously wrong you could save me a lot of trouble!

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

Strategy: time is the most valuable thing money can buy, and the good news is that the exchange rate isn't too shabby. If you internalize the idea that spending more won't produce a significant happiness gain (hot tubs might be an exception), you can avoid many compromises you might otherwise make out of a perceived need to earn more. If you're lucky, you might even get out of needing to earn at all.

Tactics: Advertising works, and you need to stay away from it. Be wary of things that make paying more convenient. Take smart risks - avoid most types of insurance. Be grateful, every day.

Reader Profile: SP

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 SP. She answered my questions (in bold italics below) as follows:

Please tell us a bit about yourself.

I’m a late 30s married woman living in a suburb of a large city in the south.  I have a BS and an MS, both in engineering.  I’ve worked for the same company for more than 10 years.

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

Hubby and I are DINKs.  He is also an engineer and we work in the same industry, though he has worked for his company longer.  We both make six figures.  Our net worth is right around $1M with about $925K being investments/savings.

The net income listed below is after health insurance, pre- and post-tax 401k contributions (we both get a 50% match on the first 8% of contributions) and taxes. We also make $3000-5000/year in side income but we don’t account for this in our budget since it’s variable and not guaranteed.

We have no debt other than our mortgage (7 years into a 30 year mortgage but we’re paying as if it’s a 15 year).  We currently have 13.8 months of expenses saved – 6 months is allocated for emergency funds and the remainder is for future car purchases (plan to only buy cars with cash going forward) and other large expenses such as home improvements.

• Net income   $11,560/mo
• Tithes/charitable giving 1500/mo
• IRAs    917/mo
• Savings   1355/mo (recently increased)
• Mortgage   3350/mo (includes the extra payments)
• Food    875/mo (groceries and dining out)
• Cable/internet   185/mo
• Cellphones   115/mo
• Utilities   325/mo (electricity, gas, phone, alarm, water, termite, garbage)
• Auto related   400/mo (insurance, gas, tags, emissions, basic maintenance)
• Travel    1100/mo
• Personal   300/mo (clothes, hair/grooming, etc. for both of us)
• Other    270/mo (gifts, entertainment, housecleaning, gym, sports, etc.)
• Scholarship fund  208/mo (new line item)
• Investments   660/mo (new line item for investing outside of retirement accts)

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

I’m okay with our spending.  The one area I think we can do better on is food spending (we both eat lunch out at work almost every day) but I’ll admit we don’t try that hard.  The ‘other’ category is also supplemented by any side income we receive (the rest of that income goes to taxes, tithes and a SEP-IRA). 

I feel we are doing well financially so my main concern is how we can do better.  A lot of money over the past few years has gone to debt reduction (my grad school loans, purchase of two cars, cash in to refi the mortgage to a better rate, extra principal to eliminate PMI).  We also did a deck project this summer that hubby had been wanting for years.  With those out of the way, we have a lot more disposable income (hence the two new line items and increased savings amount).  

We have plans to consult with a fee-only financial planner this year in order to review our financial plan and portfolio/current asset allocation.  We both max out our 401k and IRAs but I would like to save more for retirement.  We both currently have pension plans but I don’t want to rely on those plans being continued until we retire and/or us both staying with our current companies until retirement.

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

Our plans for the future are to retire even earlier – current plan is to retire when I’m 55 (hubby is a few years older than me) – and to be more charitable.  We plan to start a small endowed scholarship at my alma mater next year but other than that, there are no definite plans. 

Buying a rental property is a strong possibility.  We made a couple of offers this year but both deals fell through.  We’re taking a break for now but may resume our search in a few months. 

We don’t have any nieces or nephews yet but would like to assist with college for any we may have in the future when the time comes.  I’m also interested in possibly working overseas at some point.   I’ve always wanted to live overseas so I figure, why not.

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

One thing my father impressed upon me was ‘part of all you earn is yours to keep’ so I’ve always saved something starting with my first summer job at age 16.  In retrospect, I could have and should have saved more but I don’t feel like I’ve done that poorly, all things considered. 

My general philosophy could be stated as – take care of the dollars and the cents will take care of themselves.  I automate the heavy hitters (such as giving, saving and investing) and don’t worry so much about setting a firm budget for the rest.  I’ve always been somewhat frugal by nature (thanks again dad) and am a firm believer in intentional spending. 

To me, intentional spending means not being frivolous with money and spending only on what’s truly important to me.  Having the latest cellphone or electronics is not important to me (recently bought my first flat screen TV only because the 10 year old tube TV died) but we spend a huge amount on travel because it’s something we both love. 

All that said, I think there’s always room for improvement, which is part of the reason I decided to do a reader profile.  

Reader Profile: AA

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 AA. He answered my questions (in black italics below) as follows:

Please tell us a bit about yourself

I am 38, married to a woman of similar age and we have 2 new teenagers. I met my wife in high school and fell in love. We got married right after college although we were acting as a married couple throughout college including living together, sharing finances and planning for our future together.

We're frugal by nature since we both grew up in situations that made us appreciate the value of a dollar. My wife spent time sharing mobile homes and even barns with family to have a roof over her head and trying to make a block of cheese last a week for two people when she was a teenager. I was more fortunate and had a middle class family, but with a frugal father who exposed me to what life was like for people who had nothing and couldn't provide for themselves of for those they loved.

I was exposed to experiences that really instilled in me my major financial stress: I never want to be in a circumstance where money is the limiting factor to my loved ones' needs. I never want my wife or kids to not have something they need, especially medical care but also food, clothing, and private shelter. I believe that this was the driver for my work ethic as a young man...fear that the people I love might need something that money could buy.

I was a lazy, class skipping, get Cs student in high school. Once I met my to-be wife, I was highly motivated to be a success in order to have resources to enjoy with her and to take care of her. She changed my life in more ways than one.

In my senior year, I got As and got accepted somehow to a decent college. I went on to get a 3.5 average in college while working full-time. I had a few stress breakdowns during that time and will never forget that feeling and when I feel it coming on as an adult, I know I need to chill out. I did 15-17 credit hours a semester and worked 40-50 hours a week in a challenging job (I would literally schedule sleep). I got an entry level position during the summer after my freshman year, which turned into an entry level position with another company during the school year, which turned into a career.

When I graduated college, I was competing with all my peers for jobs, but I had the advantage. I not only had a degree with good grades, but I also had three years of experience within my career field. I also had shown responsibility and a work ethic that is rare in college kids. As an employer, wouldn't you be willing to hire a kid that could do 16 credit hours and work 45 hrs/week at the same time?

My ideal family life was to provide financially for the family while my wife would be able to raise our kids the way we wanted to raise them (we're kind of weird). We didn't want to rely on daycare of any sorts so that meant that we'd have to rely on my income alone. My college degree is in Computer Science and we lived near a large government contracting population. This meant that I was in high demand and was lucky enough to make good money for my age and circumstance.

Changing jobs was the best way to increase income as a government contractor. For government contracting, the company cannot justify increasing their rate 50% for a junior employee to retain that person, but a company can justify a high rate for a new employee. So I jumped companies every year and each time got between a 25% and 50% pay increase. In May 1997 when I graduated, I got a job making $40K, which was the highest I had heard of amongst all my peers with a B.S. degree and being 22 years old.

Two and a half years later, in December 1999 at only 24 years old, I accepted a job making $100K, but with no benefits so after I paid all my costs, it was about $90K. At this point, I kind of hit a ceiling. Rates for government contractors are competitive so there is only so much a company can charge and still win work. So unless you have a real reason to make more, like a doctorate degree or have expertise that nobody else has, you're going to make good money, but that money will be basically constant with little upside for a long time (decades).

This is when I realized that being an employee is not a way to continue to grow my income. I knew I had to become an entrepreneur of sorts. I created my own company as a government contractor and grew that company up to six people. I was still in my mid twenties and was very naive about how to run a company, much less a government contracting company.

When contracting to the government, there is a tremendous amount of rules, regulations, red tape and politics you have to deal with. After a few years, it was really weighing on me and I was becoming overwhelmed. A competitor out maneuvered me and outplayed me and ended up putting us out of business. My inability to think at a higher level due to several factors (lack of experience and spending the majority of my time on minutia) was my downfall. My company was gone and I had to get a job again making a lot less money. I think it was a good thing in the long run because I was having stress anxiety attacks and not spending any quality time with my wife and new son.

Being a CEO of a growing company was exciting and I thought the future was bright and limitless so I did not pull a lot of money out of the company. I reinvested most of it in growing the company and making the employees happy. So when the company was gone, I didn't have much to show for it. That fact combined with a new job where I had to build somebody else's company making an average salary was quite depressing. I slugged along for a couple years trying to take advantage of all the extra time on my hands now that I didn't have to spend all my nights and weekends working on my own company. I love my family and enjoyed that very much but wanted more professionally.

Fast forward to now and I've started another company (about 5 years ago) contracting to the government because I couldn't stand working for somebody else. You realize after awhile though that you are always working for somebody else. It is just which decisions you get to make. I work for my government customer and when they make decisions I don't like, I still have to march to that path. I just get to make the decision of which health insurance I want to have, what overhead costs I'm willing to incur, etc. Those decisions can become burdens when you have employees and you have to do all the work to get things in place for them.

So now, not only do I work for the government customer that I don't really respect, but I also work for my employees as the chief everything - setting up insurance, going through audits (and there are many when you deal with the government) and setting up all the red tape regulations within your company. I do take more out of the company now to take care of my family so I don't have a repeat of the last company where I reinvested it all and lost out on a lot of money.

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

Both my wife and I work in our company. I'm the CEO and she is the business administrator. Together, we make about $200K, but this is temporary. The government is cutting budgets and thereby cutting into what we provide for the government. Our current contract expires in 2014 and I don't expect them to pay us anymore after that. Our future is very uncertain.

We contribute 10% to our 401K and receive an additional 15% from the company via our profit sharing plan so 25% of our income is going to a retirement account. That is a nice benefit to owning a company and deciding on how the retirement plan will be setup.

Our expenses include:

• We tithe 10% of our gross
•  Our tax rate is high given our income
•  Mortgage payment of $2500 on a loan that will be paid off in 2028 and has a 3.125 APR.
•  Utilities, food, youth sports, entertainment, gas, clothes, etc of about $3K/month
•  We're losing about $200/month on a rental property. (We had a high mortgage payment on our home because we bought near the top of the real estate bubble and when we moved, we decided to rent it out for as much as we could get and keep the house until the real estate market recovered and then sell it. This means that we lose a little bit each month, but we're making more equity with each month that they pay the majority of our mortgage payment and the real estate market climbs. The house is in a highly populated and high demand area so it'll be easy to sell and will continue to climb in value for the foreseeable future). The value of the home has increased $150K in 5 years since we started renting it out so in theory, we've made $2500/month in equity while paying down the mortgage and then subtract $200/month so not a bad thing.

Our assets include:

• Current residence: We have about $50K in equity.
• Rental home: We have about $450K in equity. We'll probably sell this in the next three years and then put that equity into our investment account.
• Retirement accounts: $820K
• Investment accounts (after tax savings accounts with the majority of money in ETFs and some in cash reserves as an emergency fund): $380K

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

I don't want to work anymore :)

We don't have any debt except for our two mortgages. No credit card debt and no car payments. We're able to save quite a bit each month.

The issues we're having is that we're very very busy and struggle to make time for the important stuff like family time so when we have spare cycles, we purposely decide to do family activities rather than do some smart financial actions such as figure out how to save a few bucks on insurance, utilities, cell phone plans, car maintenance, etc. We end up overpaying for a lot I think but I'm not really sure because I don't want to make the time to figure it out. I prioritize my time towards family fun and trying to increase our income.

The biggest issue we have is that our employment is not secure beyond the next six months. There will likely be a big drop off and I'll probably have to get a job with a 50% pay cut and my wife will not get a job. Our income will most likely drop by over 50% in the next six months...unless I'm successful in finding new work which is what I'm spending a lot of my time on.

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

I'm growing tired of my current professional circumstance and would love to change gears. The government's bureaucracy and contracting requirements really are very burdensome and drive top-notch talent out of government contracting and into the commercial sector. The problem is that this causes quite the stress for me. I have a job that I don't enjoy and on some days, just flat out hate. It pays more than I could have imagined though so I end up having a choice to make. Continue with a job I don't like and which makes me irritable and unhappy when I get home (which my family sees and has to deal with) and that will provide for my family's needs with plenty of extra for a happier retirement...or...move on to something else that would make me happy but making a lot less money that would force my family to give up some things that they've become used to having. I feel stuck. I want my family to have everything they want, but I'm pretty miserable providing that lifestyle.

Honestly, I've spent quite a few hours trying to figure out a way to retire and work on what I want to work on (entrepreneurial efforts that don't focus on the government). My current hope is to retire in 2024 when my youngest graduates college at which point I'll be 49 years old and according to my amateur savings spreadsheet calculations, I'll have a net worth of $2.6MM but more importantly, $1.0MM of savings to live off of until I reach 60 when I can use the retirement account funds without penalty. Ideally, I could find a way to retire earlier and still pay for the kids' college tuition, health insurance and a home to live in plus live a nice comfortable life that includes some vacations and not worrying about buying good alcohol (I do have my vices). I even spend a few hours every month playing with my spreadsheet and looking online to try to find a magic way I could retire on what I currently have. Man, I wish there was a way (I'd love for a reader to tell me about that way in the comments). Most of our net worth is tied up in retirement accounts where withdrawals will cost us penalties and I'm not interested in that. So to retire early, it seems that growing our non-retirement funds is required. If we sold the rental and added that to our current savings, it would be $830K and applying the 4% rule, we'd have to live on $33K/year. Our mortgage alone is $30K/year. Oh well. Gotta keep plugging away for another 11 years. I realize this is a good problem to have, but that doesn't mean I will stop trying to find a way.

In my dream world, I'd retire but I wouldn't stop working in 'retirement' but I would do fun (or at least my idea of fun) things like develop a software as a service company that helps small businesses get beyond the red tape and concentrate on their innovation/ideas. I love the entrepreneur spirit and want to help people who strive to be one.

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

I learned about compounding interest when I was young. Fortunately, I saved a lot of money in my retirement account because I knew about it. I think this is the number one financial lesson any young person should focus on. I wish I had saved more in a non-retirement account to take advantage of compounding now. I expect to make more money in interest this year than I made in a year of employment when I graduated college just 16 years ago all because I saved early in life. If you're young, open a spreadsheet and run some numbers. Hopefully you'll be amazed at the power of compound interest and be highly motivated to save every dollar you can.

I also believe that you should always be looking for new ways to grow your income either through promotion, entrepreneurial side projects or improving yourself so that you'll be ready for opportunity when it presents itself. I spent a lot of time reading and applying new programming languages on my own, developing technically complex side projects to learn from and thought a lot about technology and how it could help my customers. All this meant that I grew faster and became more valuable than my peers. When they were partying, I was studying. My brother thinks that I missed out on life experiences because of that, but I think my reward is much greater...the confidence that I can pay for a medical procedure if my son or daughter needed one. I can also create more life experiences now than I could have if I didn't have any money. I've taken the family on a couple fun vacations every year and my wife has taken lots of pictures along the way. We also fund the kids' sports which allows them to be on a travel team which travels around the southeast portion of the country where they have adventures with their friends in hotel pools and messing around between games. We have memories...just not memories of getting drunk and passing out on the frat house floor.

I teach my kids that every time they receive money, they need to set aside 10% for tithing, 10% for saving and then taxes at about 30%. So that leaves them with half of the incoming money to spend on necessities and then fun stuff. If they could increase the 10% savings, they'll be better off. Every birthday card with money gets the treatment...10% to savings, 10% to God and they can have the rest but they know that if they were older and this was a paycheck that another 30% would come out for taxes.

Some other things I believe:

• Figure out a way to provide real value to people with resources
• Do something today that makes tomorrow better (i.e save money)
• Think about your long term vision often, especially before you make a decision that will negatively impact your financial future (like buying jewelry that you don't need)
• Keep it simple.
• Money is not everything, but it does provide freedom (eventually)

Reader Profile: JV

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 JV. She answered my questions (in black italics below) as follows:

Please tell us a bit about yourself.

I am married, 25, and I work in sales in Pennsylvania. My husband is 25 and is a graduate student. We are college sweethearts and have been together for 6 years but only combined our finances about 2.5 years ago when I graduated from college, we got engaged, and we moved in together.

My husband will graduate with his Ph.D. soon so we both are in the process of finding new jobs for our next stage of life.

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

Both my husband and I work. My husband's parents paid for his college, and my college was covered through a significant scholarship, some parent money, and part time jobs. Because of this, we do not have any student loans. We are in the lucky position to be able to focus on wealth building as soon as we have started our careers.

When I first started making money, I did want to buy nice furniture, kitchen gadgets, and clothes -- all things that I had a little but not a lot of growing up. However, since then, I've started to value freedom more than stuff and we have reduced our expenses dramatically. In August, we moved to a crappy student apartment and reduced our rent by $400 a month. Our friends and family thought we were crazy for moving somewhere without a dishwasher, but being within walking distance of my husband's job has been fantastic so we are happier here than we were at the other place. We've also sold our second car in the last few months.

On to the numbers:

Income

• My paycheck: $2,938 (after tax and health insurance, though we normally get a small refund)
• Husband's paycheck: $1597.70
• My company 401K deposit: $119.17
• Average extra income- TA work, bonus: $100

Total: $4,754.87

Expenses

The housing expenses are for our new place. Everything else is averaged over 10 months, which is how long I've been tracking all of our expenses.

• Rent: $845 (gas heat is included)
• Renter's Insurance: $8
• Electricity: $30 (no AC)
• Internet: $47
• Phone: $70 ($50 per month family plan with the in-laws, plus amortized phone cost)
• Fuel/Parking: $203
• Car Maintenance/ Insurance: $212 (new tires this year)
• Medical: $46
• Groceries: $625
• Eating Out: $218
• Alcohol & Entertainment: $47
• Personal Care (Gym, Massages, Haircuts) : $100
• Personal Allowances: $220 (includes clothes, lunch money, fancy coffee money)
• Gifts: $30
• Educational Spending: $65
• Household Spending: $94
• Misc Spending: $200 (books, electronics, or couldn't figure out otherwise)
• Travel & Vacation: $330

Total: $3,390

Difference: $1,364.87 (29%)

Having affordable housing and no debt makes a huge difference in our ability to save while affording some pleasures. We have participated in multiple weddings and travel to see our family often but are glad to spend that money while cutting back elsewhere. We spend way too much money on food and it required constant attention for us. Also, I'd like to start giving to charity but I haven't figured out where I'd like to give yet.

Assets

• Car: $6,000
• Checking/Cash Savings: $7,893 (subtracting credit cards used and paid off monthly)
• Roth IRAs: $21,147.52 (allocated in Vanguard 2060 Retirement Fund, 90/10 split)
• 401K: $4,396.11 (split between large cap, medium cap, small cap, and international index funds)

Net Worth: $39,436.63

We don't keep much money in cash as my husband's job as a graduate student is very secure and it's just the two of us. However, we do anticipate needing to build up our cash reserves for moving expenses in the next year. I am also considering redistributing the investments to reduce the fees by choosing a cheap S&P 500 fund in my 401K and then distributing the rest of the money according to my ideal asset allocation of 90% stocks and 10% bonds.

Also, getting life insurance and wills has been on my to-do list since we've been married and I still haven't done it yet. It is worth it for ~$40 a month.

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

We are focusing more on keeping our expenses in check than on our investments. I've tried to keep our investments simple since our net worth is still small and the savings rate matters more at this point.

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

We have a big life transition coming in the next year as we both switch jobs and hopefully increase our income (and savings rate) substantially. This is our top priority.

Also, I plan to grow my career by getting an MBA in the next few years as I hope to transition from technical sales to a more finance heavy role.

We hope to accumulate savings quickly over the next 5 years or so. Our goal is at least $400,000 by age 30. At that point, we hope to dial our careers back a bit to have a family. Even though that number isn't enough for retirement, it is enough to give us many, many options with our careers and our family over the years.

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

Focus on saving and avoid overwhelming amounts of debt. To reduce expenses, look at the big expenses like cars and housing, and the repeat expenses like phones, entertainment subscriptions, and internet. It takes once to address it, and you reap the benefits over time. Even though we personally do not have debt, we have many friends that have large amounts of student loans or car loans and it makes for a tight and stressful budget.

Also, focus on growing your income. The $4,000 in raises I've negotiated have been small but good practice for negotiating. I believe in increasing our income and that is why we plan on moving very soon.

But most of all, I'd like for people my age to know that having expenses much lower than their income makes life so much less stressful. The flexibility and increased financial security is worth so much more than what I've given up, even if it means I wash my dishes by hand.

Reader Profile: VF

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 VF. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

My husband and I are 24 and both work as engineers for the Canadian military. We got married in 2011 and have a 6 month old daughter.

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

My husband and I are both on the same page financially, personally as well as for our careers. Family is a priority for us and our job in the military provides us with good financial stability to raise our daughter. We plan on having a second child once our first is about 1 year old.

In our 2nd year as a married couple we made a combined income of about 120 K per year (with an even split between the both of us) with a guaranteed pay increase every year (not substantial but constant). Most of our savings were used to pay for our wedding (in 2011) and put a down payment on our house (in 2012)/purchase home items we hadn't necessarily taken into account (ie lawnmower, small tools for quick fixes around the house, etc.).

Having a good income out of school and no student debt (we both had our education paid by the military), we initially splurged on diners at the restaurant, expensive satellite TV, high cost cellphone plans and other things we now consider a waste of money. Because we operated without a budget for our first year of marriage (and miscalculated the less obvious costs of owning a home), we ended up using up all of our income and were only able to put down a 5% down payment on our 245 K home. One water damage incident from a leaking toilet as well as an unexpectedly high property tax bill during our first week in the home pushed us to borrow 15 K on a 7.19% credit line. Needless to say that mismanagement of our first year of income as well as jumping too quickly into home ownership led to this situation.

We realized we were making bad financial decisions so we sat down and discussed our budget. We cut back on expenses and made a plan to repay the 15 K during the following year. We had already planned to have children within our first two years of marriage so we took into account the costs of childcare in this new budget. This is what our finances look like:

Monthly income (total 5990$)

• Me : 4796$/month gross, 2995$/month net
• My husband : 4796$/month gross, 2995$/month net
• Government childcare benefits : 100$

Monthly expenses/savings

• Mortgage & Property Tax : 1440$ (227 000$ left @ 2.99%). Mortgage is 570$ twice monthly, the extra 300$ is set aside for taxes.
• Electricity bill : 120$ (this is an average monthly payment calculated by the power company)
• TV : 43$
• Cell phones : 160$ (two cellphones)
• Internet and home phone : 90$
• Alarm monitoring : 40$ (this allows me to save more than 40$ monthly in home insurance)
• Appliances : 160$ (0% interest payments over 3 years which we took to give us more cash flow)
• House insurance : 110$
• Car payment : 530$ (15 600$ left @ 3.79%) it’s a 2011 SUV bought with the intent to keep it as long as possible
• Car insurance for both of us : 130$
• Childcare and baby food, clothes etc. : 650$ (we buy almost all clothes, toys 2nd hand)
• Dog insurance : 68$ (got this after a few couple of hundred dollars vet visits, I can already see some readers shaking their heads ;)
• Life insurance for myself, my husband and my daughter : 315$
• Gas and oil changes : 150$
• Groceries and personal care: 550$ (includes haircuts, toilet paper, etc)
• Entertainment : 100$
• Family gifts: 80$ (this is an averaged cost monthly for 50$ gifts on birthdays and Christmas for our family members)
• Home cleaning : 120$ (got this service after our daughter’s birth)
• Interest on credit line : 33$
• Pet : 35$
• Debt repayment : 800$
• Emergency fund : 100$
• Savings: 100$

Assets

• Home equity : 23 K
• GIC : 3 K
• RRSP : 6 K

Currently all of our debt repayment, emergency fund and savings (1000$) is combined to put towards the credit line.

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

Since we cannot get an investment that would give us a higher return than the 7.19% we currently have in interest on our credit line, I am putting all of our extra money including savings towards it. We owed 11 K on the credit line on the 30th of July 2013, and today, we owe only 2.6 K. We were both on parental leave the first 6 month of my daughter’s life and due to many pay issues on the part of the provincial government and our employer we initially did not get paid which forced us to balance our budget on the two months’ worth of salary I had saved for emergencies. Once we got paid back 4+month of both our pay as a lump sum in July, I put the whole thing on the credit line which is how we got to 2.6K. As well, any other income that we received went directly to the credit line. (The military completed provincial parental pay to 98% of our salary)

I anticipate that the credit line should be paid off in full in about 2 months. Following this, we are asking ourselves the following questions:

1 – How should we invest the 1000$ a month after the credit line is paid off? Should we knock down some of the principal on the appliances even though the interest is at 0%? Should we be paying extra on the mortgage or the car loan? Or should we simply be putting that money aside toward our 6 months’ worth of salary emergency fund?

2 – We both agree that our cellphones bills are way too high but it would cost us about 600$ to break our current contracts and be able to get lower cost plans. Although this would save us almost double the money over the term we have left, should we be spending this lump sum instead of using the amount for savings? We are afraid to spend money we don’t currently have, as we consider our 1000$ savings to be inaccessible for monthly spending.

3 – We are looking for any suggestions to find savings in our monthly expenses. This is to account for baby #2. We will be promoted mid 2014 which will increase our combined net monthly income by 800$ but we intend to funnel the entire amount into savings.

We made some mistakes in our first year of steady income but we have done our best over the past year to correct this. Being military, we expect to move again in about 2-3 years and we intend to maintain our expenses at our current level despite upcoming promotions and raises. We would like to focus on savings so that we can grow our net worth.
 
What are your plans for the future. (retire early, build your career, etc.)?

Although we both love our jobs, my husband and I prioritize our family and kids over advancement and promotions. Our goals are simple: to save smartly in order to be able to afford a plot of land on which to build our dream house (modest size, but with our dream layout and a great location in the country), and to retire early (we would get a 70% pension from our employer at 43 years of age). Family time is of the utmost importance for us.

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

Learn about finances and do it early. When we racked up that 15 K credit line in under a year, we realized that even a combined income of 120 K would be of no help if we didn’t plan out how those dollars were spent. Make sure to check your accounts daily, and to know exactly how much you spend on every aspect of your life (house, car payments, food etc.)

For young adults like us, I would say the most important is to avoid following friends into a spending spiral, especially after landing your first full time paying job. We invite friends over for diner instead of eating out and we avoid the pub crawl crowd – lots of money can be wasted on just one night out.

Reader Profile: RE

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 RE. I sent him the standard questions and he answered them in one long narrative as follows:

Here is the story about myself and the financial things.

I just turned 40 this year and wanted to share some things I learned. People always seem to be amazed at how it's possible to live the way I live, that I look and feel so young, always do the things I do and that I have total freedom/peace in my head. This wasn't always the case.

As I live in the Netherlands, things may be a little different from the USA. I calculated € => $ and all amounts are after taxes. :). To compare, the average wage in the Netherlands is about 2600 US$. So, every number is in US$.

I graduated from university as a Bachelor of Engineering in 1999. Never had a debt because I worked at a bar when I wasn't at university. Fresh from school and amazed by this new thing called "the internet" I quickly found an IT job and bought a cheap house (700$/month).  After 2 years, I was pretty good at my work and I had a good salary (3600).

The jobs were okay. Sometimes a little boring but then, I never thought "wow, this is it!". I changed my employee 4 times in 5 years. Later you will understand why.

I lived cheap. Besides the nice but cheap house I bought, I had no idea where to spend my money. I loved hanging out with my friends and all things we loved were pretty much free. Cycling, skating, running, camping in nature, drinking wine in the park, photography, reading, cooking with friends, its all fun and free. Without even knowing, I saved over 40% of my income. I always bring food to the office, only eat out 2x a month with friends, just wear jeans and a t-shirt and use my bicycle to go to work or friends, I just live simple. I always thought: well, what makes me happier: $1000 for a TV or $1000 in free time? The answer was ALWAYS that last.

So, my mindset slowly started to change: most (working) people start to be different after university. I didn't want a car, large house, a career, babies, or a TV as they did. At work, people cared about things I was totally bored with. So, I missed the connection with 90% of them. I had the best people around me I could wish for as friends. And, these people were the opposite of the people I met in corporate life and slowly, I really started to be bored with them, their boring life, talking about tv and sports, careers, the way they all think and dress the same, the unethical things I encountered. And I also got bored with my work itself. It didn't mean anything to me any more. A 12 weeks trip to India and Nepal with my girlfriend made it clear: I don't belong in this place called office (or a 9-17 hours prison that pays).

This was after 6 years of work. So I made a plan: how to get my life/freedom back ASAP. After 4 years of work i already saved so much money (I didn't know what to do with it, except buying freedom), that I could pay for halve my house in cash. That's what I did. My plan was: stick here until you have enough money. I thought about switching jobs again, but I already did that too often and it wasn't going to change anything, so I mentally challenged myself to stick around. :)

My plan was to pay for the other 50% of the house and have a "buffer" of 3 years again. So, I wrote down all my expenses, and looked for a way to do this in just 2 years. My mortage was already really low because of the 50% payment, but other than that, there was no quick way to save more than 70% of my expenses. So, it would take me 4 years to reach that "goal". Noooo, that's far too long! But, freedom is my #1 priority, so it took me only 5 seconds and sold my car, I didn't use it much anyway, and there's good public transport here and I still have my motorcycle. Bam, the first 600$/month saved. Then it hit me: rent out the upper floor of my house. It's really large enough for 2 student rooms and the lower floor is more than enough for me. So, I did some reconstructing to make it 2 separate houses. It was great fun having these 15 years younger students in my place. After 2 1/2 years, I payed my house and had a buffer of 3 years. At a meeting at work, at the end I said. "Well, I have a thing to say. I'm bored with you, the work, and everything. I'm going to retire at 37! ". Yeah, the faces! :)

Financially, I never have to work again. These 2 rooms still pay for everything I need in life. And I still have this emergency buffer. I travelled and volunteered for a year after quitting my job.

I also quit with my girlfriend before this (we still lived apart) and found a new soulmate that lives with me now. I do some photography (20 hours/week) and work as a travel guide for 1-2 months a year. I also do every volunteering job I can find at home. I love the freedom, the free time, the people, this city, the traveling, this life. She writes and is creative. We both absolutely love traveling. When the autumn is nearing (that's now!) we always travel and 6 months later, we are back and enjoy springtime.

So, some lessons learned:

• The same colleagues are still working "there". For 40 hours/week. This year, next year, in 20 years. Until they are 67, retire and are old. They missed everything.
• Stick with people you love. Do the things you love. Don't settle for less.
• Try to work hard the first years after school.
• Minimize your expenses. This makes you flexible, it saves the earth because of less waste and doesn't slow you down if you need changes.
• Throw out your TV. It brainwashes you into the boring people I met at work and people in general. Go meet people who are like you instead.
• Have a safety buffer of a few years. It's really good for your mindset and wellbeing to be independent from your work/boss.
• Work is not your identity.
• Volunteering is better than working.
• Experiences are better than "stuff".
• Don't worry about things you don't have control of.
• People who don't live according the norm are the people who are interesting.
• Don't be afraid. You have a good set of brains that will work it out whatever comes at you. Don't overplan.
• Travel early in life. See the world. See it for at least 6 months a year. Travel slowly and be amazed. Do it on a bicycle or a motorcycle. Couchsurf, stay somewhere for a few weeks.
• Quit "friendships"  that don't give you energy. Your colleagues are not your friends.
• You don't need a very high income to live free and semi-retire. A bit over average helps, but it's the mindset that's most important.

Some financial background information.

"Working life" (ONE PERSON)  

In/month:

• Total income: 4290
• Rent: 1170   
• Interest, stocks: 130
• Taxes: 290 

Total 5880 => 70560/year

Out/month:      

• Mortage (+50% payed): 325 
• Gas/water/Electr.: 225
• Medical insurance: 100
• Internet: 25
• House, repair, tax: 140
• Food: 175
• Motorcycle: 60
• Rest: 150
• Fun: 300

Out: 1500 * 12 = 18000

Yearly plus: 52500.    

"Semi-retired at 37" living together, total for 2 PERSONS:

In/month:

• Income: 650 (average, earned in 6 months/year)
• Rent: 1170
• Interest: 50
• Taxes: 300

Total 2200 * 12 = 26000

Out/month:

• Mortage: 0
• G/W/E: 170
• Medical insurances: 200
• Internet: 25
• House, repair, tax: 140
• Food: 300
• Motorcycle: 60
• Rest: 250
• Fun: 10.000 (6 months of traveling ;))

Out: 1140 *12 = 13700

Yearly plus: 1000-5000. Plus the 2 year buffer we have.

We don't really have a plan for the future. Maybe we rent the house in total when we are 50 and travel nonstop in a 4x4. Or rent it and buy something small just for us at the countryside. Everything is possible. :)

Reader Profile: MB

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 MB. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a 29 year old, single woman who still (sort of) lives at home. The past 6 years I’ve had jobs that keep me away from home 8-11 months out of the year, so my mail pretty much just goes to my parent’s house. I don’t see a persuasive reason to pay for rent when I would just use my vacation time to visit them anyway. I work in the arts, which is not a lucrative job and come from a family where nothing about finance was ever discussed, so I’ve pretty much been trying to figure out what you do with money on my own.

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

I work as a stage manager, but I’ve had unusually good luck to have a steady job. I worked for a cruise line for about five years, which was nice since I was able to pay off all my student debts and save up some money. I then went to grad school, which took up all those savings and put me $23,000 in debt ($20,000 personal loan with 0% interest from my grandmother and $3,000 from Sally Mae – the latter is already paid off). I went back to my job on the cruise ship for another year and a half after graduating and have now switched to working for a circus.

My current base salary is $38,000 before taxes (which are a killer), my 401(k) contribution ($58.46 per paycheck), and health care ($60.78 per paycheck). I usually bring home $1,060+/- (since the taxes change with each state we are in) every other week.

Assets:

• Emergency Fund: $3,300
• IRA: $11,100
• 401(k): $2,000
• Non-retirement Investments: $3,900

Liabilities:

• Student Loan: $3,500
• Groceries: $200/month
• Gas & Car Maintenance: $400/month
• Internet: $50/month

Other than that, I try to contribute $100/month to my emergency fund, $458 to my IRA, and a $200 tithe.

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

I’m trying to finish paying off my student loan and building up my emergency fund, as well as beginning to invest and max out my IRA contributions and I feel stretched very thin all the time. I’ve been researching multiple streams on income to supplement mine (since stage management will never be very lucrative), but keep winding up unsure of exactly what to do next.

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

Since my job houses me, I don’t have to pay any rent, but I am dissatisfied with the type of work I’m doing here as well as the pay cut to work a lot more compared to my previous job, so I would like to get my debt fully paid off, build up an emergency savings account and have the freedom to find work that is actually fulfilling instead of feeling like I sold my soul to a corporate devil.

I’d also like to create multiple streams of income (ideally ones that could eventually be passive), so I can continue to stage manage, since I really enjoy it, but be able to worry less about making ends meet since there are few jobs out there that do pay a living wage in this field.

I would also like to go on and get my PhD in the next few years and I feel like working hard now to generate passive income could make those years much easier as well.

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

My general philosophy has been financial success is 80% attitude and 20% money. All my initial steps in the right direction took just breaking bad habits and forging new, better ones.

Reader Profile: EA

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

Please tell us a bit about yourself.

I'm a 27 year old single male living in a metro area of about 380k in the Midwest. I currently work for a large Fortune 500 financial services firm, having previously worked for a smaller consulting firm headquartered in Chicago.  I left my relatively high paying consulting gig about 18 months ago to take a position closer to my friends and family.  My last job required extensive travel and uncertainty with long term employment... but the six figure salary, which I had since graduating in 2009, was nice.  I also purchased a foreclosed home about 6 months ago which has been an exciting and expensive project.  I have a bachelor's degree and my MBA, both from public universities in the state system.

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

Income (monthly):

$3,400 - monthly take home, after taxes/insurance/401(k)/etc from my job.  I contribute 4% of my salary to get the maximum match from my employer. My base salary is currently about $60k with bonus potential of around $8k, which is relatively secure but could drop to $4k in a down year (very unlikely).  A $4k bonus (annualized) would add about $200 a month but I don't count it in my cash flow.

Expenses (monthly):

• $1,150 - mortgage payment (including taxes and insurance)
• $315 - car payment
• $300 - food (groceries, restaurants, fast food, etc)
• $250 - utilities (electric/gas/water/garbage/cable/internet)
• $200 - gas/auto maintenance
• $115 - student loan (2.99% fixed, approx 7 years remaining)
• $75 - cell phone
• $65 - car insurance
• $50 - personal/household (haircuts, dry cleaning, etc)
• $30 - 529 plan (for my future kids, or myself)
• $400 - various 0% credit cards (used to fund some home improvements, amortize 12/2014)
• $150 - gifts/charity/travel
• $300 - house expense overflow/entertainment/misc
• $3,400 total expenses

Assets:

• $155,000 - home (2,400 sf home on 1/2 acre lot in an established subdivision, 10 min from work)
• $20,000 - vehicle (5 year old SUV, purchased 3 years ago)
• $37,000 - investments ($27k Roth IRA, $4k brokerage, $5k 401(k), $1k 529 plan)
• $1,000 - cash (severely depleted due to home purchase & remodel)

Liabilities:

• $130,000 - home mortgage (29.5 years remaining, fixed at 3.75%)
• $13,400 - auto loan (2.79% fixed, 4 years remaining)
• $8,500 - "student loan" (refinanced grad school loan to a 2.99% fixed credit card offer, good for life of loan)
• $6,000 - home improvement loans (technically 0% credit card debt, scheduled to be paid in full 12/2014)
• $5,600 - line of credit (final home improvement items, receiving $5k from parents to mostly pay off shortly)

so about $50k net worth, currently.  I've put about $30k into the home so I would expect the appraised value to improve.

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

By far my biggest issue has been the house purchase and remodeling, which of course was way over budget (and still lots more to do).  I used essentially all of my cash for my house downpayment and remodeling, but I should note over $30k of my investments are liquid & can be withdrawn without penalty and I have access to about $50k in unsecured credit ($25k at 8.25%).  I still have about $30k in improvements to complete over the next 24-36 months, so that's on the back of my mind.  I may look to get a new appraisal next spring and try to get a HELOC to help support other improvements. 

I need to rebuild cash and pay off the home improvement loans and line of credit ASAP which would cut out $400+ of monthly cash flow.  The student loan balance is fixed at 2.99% so I'm not as concerned, but would still like to get out of debt the sooner the better (started at $50k student loan balance, so the end zone is in sight).  While earning a six figure salary for 2 years, I applied most of that money towards my student loans & investments but I also purchased an SUV ($40k) and other fun stuff like trips, concerts, etc.

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

Short term - Possibly get a roommate.  My house is huge for a single guy and I can easily get $300/month to rent a room.  The extra cash flow could help cover the home improvement loans, plus cut the utility expenses & help rebuild cash.

Medium term - Complete the home remodel.  The house is by no means extravagant, but it needs basic updates & should appraise north of $200k when complete (mortgage will be about $125k at that point and possibly $20-30k in HELOC).

Longer term - Eventually I'd like to get married and have children, so I'm slowly preparing for that (house, 529 plan, retirement accounts). I work for a great company and group of people, so I'd like to continue to develop my career in this area.  Retirement seems so far off, but I'm trying to get a jump start now so I can relax later in life.

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

"Pennies make dollars" is a phrase one of my older family members used to say.  At the time I thought it was just an excuse to be "cheap" but its so true in my daily life.  It makes me think about the purchases I'm making and thinking how they add up over the course of a month, year, lifetime.

I would also plead with younger people to understand the importance of credit at an early age.  Open a credit card when you get your first job (hopefully before, if you're responsible) to start establishing that credit history.  I see so many talented, hardworking college grads who can't get a car loan, mortgage, or even a credit card (or get charged a lot higher rates) due to no credit history or prior banking relationship.

Reader Profile: GF

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

Please tell us a bit about yourself.

I'm 57 and married. My wife of four years is 63. We live in Tampa, Fl and I've owned the home for 24 years. I have one son (23 years old), from my previous marriage, who is on his own and living in England at the moment.

I served in the Air Force for four years, got out, and with the GI Bill and a side job put myself through college at Florida Institute of Technology so I came out with no student debt. I was employed in the marine aquarium field for about 10 years, then got married and had my son and discovered it was time to make some real money. I came back to Tampa from the Virgin Islands and fell back on the second part of my degree in environmental technology and have been employed in the environmental laboratory testing business for the past 20 years. I've experienced several business cycles, some layoffs (for others, not me, thankfully), several buyouts and name changes and one outright closing of the lab that I worked for. I was hired within a month at our sister lab in the same city so have technically been with the same company for 20 years, although when I was rehired, for the same position, I had to take a 30% pay cut. I recovered all that and more in about three years.

My current wife has had some misfortunes along the way, both personally and financially and for all practical purposes has no real personal savings to speak of. She is a hard worker and very good at her job but really doesn't handle money all that well. But at least she has no debt! We aren't big spenders and do a pretty good job of staying within our means. Our only “vice” being good food and wine!

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

My wife makes enough right now to cover her basic expenses as well as our cable/internet/cell phone bill and her insurance. She also contributes to the food and takes care of our dog. She was let go through downsizing about a year ago and suffered about a 40% decrease in income, having only found this job three months ago for $14/hour as a temp to perm. position. It's undecided if she'll keep this job as she must spend about $240 a month in tolls and gas just to get to it and back!

I make about $42,000 a year, $2300 take home a month, and am responsible for the major bills and any emergencies that should arise. The breakdown follows along these lines

LIABILITIES:

• Mortgage (w/taxes and insurance) $700/ month ($32,000 left on the note with about 5 years to payoff). Interest rate is 6 %. I haven't refinanced recently as I'm not sure it would be worth it. I pay extra on the principle on occasion.
• HELOC $350 Interest only loan with a 10 year draw at 3%. Right now the interest payment is about $160 but I usually pay $350 to help whittle it down. There is a balance of $45,000. Almost all the money went to much needed repairs and upgrading of the property including a new roof, AC and kitchen.

EXPENSES:

• Visa usually 0
• Church tithe $240
• gas $40
• food/wine $350 (we tend to splurge a bit on weekends)
• misc. (gardening, entertainment etc.) $100
• electric avg. $85
• water/sewer $60
• car insurance $78

ASSETS:

• Home : value about $150,000
• 401k: $65,000 (I've contributed anywhere from 3 – 15 % into it over the years depending on the economy and personal economic situation. (kids braces and things of that sort)
• cash: $75,000 (from recent inheritance)

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

Current financial issues we face are retirement and what to do with the $75,000 cash that I only received last month. Right now it is serving as an emergency fund in a savings account earning very little interest.

I'm a fan of Dave Ramsey and am tempted to pay off the mortgage ( a fixed value every month) and a substantial portion of the HELOC. But I did have someone advise me to keep the cash that I have as it would take some time to “save back” the cash and I'd be hamstrung in an emergency situation. At this stage of the game I'm saving for the both of us. My wife could retire next year and I have at least 10 more years.

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

The best piece of financial advice I've ever learned, and adhere to, is “pay yourself first”. I love the book The Richest Man in Babylon.

I've seen the rise of gold and silver (early eighties) and I've seen them fall. I've seen the rise in stocks and seen them fall (substantially!). I've tried penny stocks, individual stocks, and mutual funds. And now with the state of the economy, and the world in general, it really makes one think, “just what is safe anymore?” Anything? I've come to the realization that simple is almost always better and that a plain Jane vanilla index fund is probably the way to go. Since they became available to me in my 401k plan, I've embraced the Vanguard Balanced, Small cap, and Mid-cap funds.

Reader Profile: CH

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

Please tell us a bit about yourself.
 
My wife and I are both 29 and have two young children. I have a bachelor’s degree in Math and my wife’s degree is in education. I worked for a very small company for my first six years after college in an engineering role and now work for a Fortune 500 company in a technical sales position.
 
We live in a suburb of a major midwest city. We both prefer a rural lifestyle and at some point would like to relocate to a more rural area and live on a small farm or ranch. I thoroughly enjoyed CT’s reader profile from a few months back.

We are very self-sufficient in everything we do. I do all of our own vehicle and home maintenance and repair as well as some large home improvement projects that most would leave to a contractor. My wife cooks nearly all of our meals and buys nearly all of the kids clothes and toys second hand. She potty-trained both kids by 20-months and used cloth diapers 75% of the time anyways. She also breast fed them both almost exclusively. These things are direct reasons why we are able to save at the rate we do while still feeling like we live very comfortably.

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

I am the sole wage earner in our family. My wife is a full-time stay at home Mom and will remain as such for at least the next the five years. I made less than $40k my first year out of school and while I did have a couple of nice salary increases, I feel I was considerably underpaid throughout my time with my previous employer.

In my current position I have a base salary of approximately $64,000. I also receive commission checks throughout the year that could range anywhere from $10,000 to $30,000. This year it will be right around $30,000 for a total salary of $94,000. My total salary last year was also right around $90,000, but my finances are all based on an annual salary of $80,000 as that is a much more reasonable number to regularly expect (excluding any annual raise), as I know I have made some sales that simply won’t repeat.

I put 6% of my salary into a 401k. I get a 50% employer match on that and get another lump sum equal to 3% of my salary every year. Essentially, I put in 6% of my salary and my employer puts in another 6%.

As you’ll see below, I also have a brokerage account I manage myself. I do not consider myself an active trader by any means. I usually hold between 4-6 different stocks and buy with the intention that all gains will be long-term gains. I do all that I can to stay in the 15% tax bracket, thus keeping my long-term capital gains rate 0%. I opened the account in 2009 with a very small investment and have had extraordinary gains ever since. 2013 has been no different with YTD gains over 30%. I could probably write an article on my trading philosophy, but in short I would sum it up by saying I am a value investor. I do not expect these gains to continue forever, but I am also very confident in the value of my current holdings.

Take home pay is approximately $5000, again based on an $80,000 annual salary.

Expenses

• Mortgage – $850
• Property taxes and Insurance – $400 (I do not use an escrow account so I put aside an extra $400 myself each month. I do not consider this account as an asset.)
• Student Loans – $75
• Car Insurance – $33 (I technically pay this in a lump sum each year of about $400)
• Utilities - $275 (Average)
• Cable, Internet - $90
• Gym - $50
• Preschool- $80
• Wife spending - $1200 (This includes all groceries and regular necessities)
• My spending - $200 (This covers vehicle and home repairs as well as some of the miscellaneous stuff. More on these two below.)
• Total - ~$3200

We each have our own small spending budgets. I manage the household finances almost exclusively, but my wife has $1200 that she can choose to spend however she wants, with the only caveat being that she must pay for all the groceries and other basic consumer goods. This gives her the autonomy to spend a little extra money however she wants, and keeps our overall budget reliable. I do not ask her for the exact breakdowns of where all of that money goes and this works very well for us. My $200 prevents her from incurring too many unexpected expenses.

Savings

• 401k - $9600+ annually depending on commissions.
• Brokerage Account - $1500/month
• 529’s - $150/month

This leaves about a $150 excess each month. Extra money at the end of the year gets split between home improvements and the brokerage account. I will also make a significant contribution to my HSA at the end of this year both to stay out of the 25% income tax bracket and because I know we will have significant medical expenses next year where we will hit our out-of-pocket maximum.

Rental

• Rent - $800
• Mortgage - $430
• Taxes and Insurance - $170
• Expenses - $20 (This is an actual average. I keep at least $1000 in our separate rental checking account for the unexpected.)
• Cash Flow - $180

This is a newer townhome that my wife lived in before we were married. I would like to sell it in the near future. It is new enough that it requires very little maintenance. There have been years where I did not have any repair or maintenance expenses at all. When something does need fixed, I usually do it myself.

Assets

• 401k/Traditional IRA’s - $45,000
• Roth IRA’s - $80,000
• Brokerage Account - $115,000
• General Savings - $12,000
• 529’s - $6000
• Primary Home - $250,000
• Rental - $85,000
• Vehicles - $8000
• Total - $595,000

Liabilities

• Student Loans at 3.5% – $7500
• Primary Mortgage at 3.625% - $183,000
• Rental Mortgage at 3.375% - $57,000
• Total – $247,500

Net Worth: $353,500

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

I would not say we have any specific issues. At this point we simply concentrate on saving as much as we can. Up until the start of 2013 I maxed out a Roth IRA for both myself and my wife and did not regularly contribute to the brokerage account. This year I have already maxed out a traditional IRA in her name and have made the decision that all other savings will go into the brokerage account for the foreseeable future. I will maintain my 401k contributions. I think between that contribution and our current retirement plan assets that we are comfortably on track to have enough retirement income after the age of 59 ½.

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

My wife will have a master’s degree by this time next year. Again, it will be years before she goes back to work as we will likely have one more child and she will remain at home at least until they are in school full time. I estimate that to be about seven years from now. At that point, she will likely work part time. Her master’s degree is very specialized and while the income opportunities are not great, the opportunities for part-time work at a decent pay are tremendous.

As for me, I am content in my current position and I feel my employer treats me very well, but I cannot see myself as an employee for much longer. I will likely choose one of two routes. I will either move on in two or three years and likely buy and run an existing business, or I will continue with my current employer for about seven years until my wife works again. I have good reason to believe I will continue to get annual raises of 3-5% and in 3-5 years I should be the front runner for a major promotion. This probably sounds like a great scenario to some, but I do not feel fulfilled unless I am the one making the key business and financial decisions. I think it is that trait that has drawn me so much to the stock market as I thoroughly enjoy examining company’s’ financials and making trading decisions accordingly.

At the end of seven years, I would ideally work and manage a farm while my wife works part time outside of the home. My goals would simply be to make enough money to cover our living expenses. I hope to have enough saved in other accounts by that point that additional savings won’t be necessary and we can simply let our money grow. I would consider this my ideal retirement. It’s hard to see myself not working, as I enjoy both the physical and mental aspect of regular chores and decision making.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
 
For those that are looking to retire early or at least escape the career mentality like myself, I like to think of this as my “fill the gap strategy”. If I continue to fund my 401k over the next seven years and assume an 8% return, we will have about $2MM in retirement savings at the age of 60 when we can start pulling it out of the IRA’s. My focus now is to fill the gap between the time I quit my job and the time I can start withdrawing from the retirement accounts. I plan to do that with a combination of the brokerage account, my wife’s future part-time income, and hopefully some farm income.

As for advice, I have to go back to what I started on in the first section. Don’t just teach yourself to be good at your job, but teach yourself the other skills necessary to be self-sufficient in the rest of your life. A great deal of money can be saved when you are able to fully provide for yourself with your own labor.

Also, know your tax situation and take full advantage of it. I will have my taxes completed for 2013 by the last week in December and then make one large HSA contribution to keep me in the 15% bracket. I don’t want to pay a single dollar in taxes that I don’t need to, but I also don’t want any extra money tied up in an account that I can’t readily access.

Finally, for some detailed advice, don’t ever have a car payment and only own a vehicle that you can afford to replace. I am lucky enough to have a company provided vehicle that covers my daily commute, but my other vehicle is 15 years old and my wife’s daily driver is 10 years old. They are safe, reliable vehicles that we obviously don’t have much money invested in. We both drive safe and carry liability insurance only on them, thus reducing our cost of ownership even more.

Reader Profile: BW

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

Please tell us a bit about yourself.

I’m 31 years old, male with a trade certificate in Automotive Service Technology living in Calgary, Alberta, Canada.  I work in Supply Chain at an oil and gas producer that I have been with for 2 years and have been in the same field for 8 years.  I have been married for 5 months but we have been together for 4 years before we took the plunge.

Funny how we think our lives will turn out, mine like all stories started with a girl.  We fell in love but my hours at work at a car dealer were not good, the pay was horrible and it was hurting our relationship.  I found a job pushing paper around at an engineering company not even knowing what it did.  I started from the bottom and worked harder than anyone there, moving my way up until an opportunity came up for me to work in the middle east.  Worked there on site for 2 years and it was the best thing that ever happened to me.  Hard to be away from family and friends for that long but it allowed me to explore the world.  Worked at a couple more sites here in North America till I settled back in Calgary with a desk job.  My wife works here as a Nurse at a local children’s hospital.

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

Income

• Income(Me) – $125,000 (Base)
• Bonus  (Me) – $20,000(Min)
• Stock (Me) – $50,000 (Given every year then vested every 3 years)
• RRSPs (Me) – $15,000 (12% of base)
• Income(Wife) – $80,000

Fixed Expenses are $3,278 a month, and our variables fluctuate a lot month to month (usually dinners out)

Assets

• House – $420,000
• Cars – $35,000 (combined)
• Cash – $1,500
• RRSP – $65,000
• TFSA – $15,000
• Taxable Investments – $5,000
• Private Equity – $250,000
• Wife's Pension – $20,000

Liabilities

• Mortgage(3.5%) - $265,000
• Car Loan(4%) - $17,000
• Student Loan(Wife) - $2,000

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

Both of us aren’t really great savers (wife had CC debt and larger student loans when we met)  and neither of us can really stick well to a budget so how we make it work is I invest 22% of my base salary into investments(plus the 12% I get from my company) for 34%.  We also increase our mortgage payment every week to pay that off faster.  We learn to only spend what we have left.  We don't spend alot of stuff but we do enjoy vacations and that is where a large amount of our discreasionary income goes.  Don’t usually like to keep a lot of cash around as I like to be fully invested at all time.  Have been thinking about this as of late to maybe to accumulate cash and buy on more opportunities rather than every 2 weeks with my pay and bonuses.  My bonus for me are started to pay off for me this year as what I got when I started is vesting now so my bonuses are going to grow considerably.  We don’t count them into our monthly income so they get invested as I get them.

The small amount of student loans (at 1%) isn’t worth it to pay off in my opinion and my wife can write off part of the interest anyway.  The Car loan is through our bank at a really low percentage as well so in our opinion its not work paying off early as we feel there are better opportunities elsewhere.

We are also looking to start a family in the near future so my wife will be staying at home and the plan is to have her stay at home permanently just working some casual shifts as they come up.  Daycare is ungodly expensive here in Calgary and for the cost we feel its better for my wife to stay at home and raise them ourselves.  We know we are lucky enough to be able to support us on 1 income.

Our plan is to really ramp up our savings and hope to get to 50% + in the next few years.  Our house is really inexpensive for Calgary, still hard for me to understand how starter homes here are 400k+ and the mortgage is quite low.  We are looking for a bigger place in the next 5 years or so.

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

Plans are to get to a point where we don’t have work anymore.  Right now I work quite a lot and have built up my career faster than most people I know my age.  All of my staff are older than me and have been since I started working.  Ideally I would like to get to 250k a year from my job to replace my wifes income so she doesn’t have to work at all.

When we have a good base of assets I have some colleagues that I might start a small EPC company to concentrate on small oil and gas projects.  The idea of owning and growing something of my own is very appealing to me.  The hours will be long sometimes which might be a turnoff when we do have kids.

I have made some investments in private equity companies through connections I have made.  They are for sophisticated investors and are very high risk/high growth opportunities.  When these start to pay off I have a colleague that would be interested in starting some angel investments here in Alberta.  Would be great to give people the same opportunities to succeed as I have gotten.

Also very interested on working with some charities to help with fundraising.  Alberta is very polarized, people make a lot of money or not very much.  Very hard to live here on minimum wage jobs with a high cost of living.  Would love to help younger people get into a career with training that they normally wouldn’t be able to afford and show them opportunities to change their lives.

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

I suffered a huge loss trusting someone I shouldn’t have.  We moved in together way to early and I didn’t do enough to find out about her background before we bought a house together.  Even though we were never married from what she stole from me and legal fees I have lost several hundred thousand dollars(which is why my savings/investments are way behind where they should be for my income).  Even with a signed contract of what she will pay me I have not and will not see a dime.

Lesson: Don’t just trust everybody, there are very few people that have your best interest at heart.

Save more than what you think you need.  Experts say 10%, it should be way higher.  Having more money builds confidence, you will do better in your career and your life if you don’t have to worry about money.  When you are not worried about losing you job because of money, it allows you to take bigger risks which get you ahead faster.

Lesson: Save more than you think, way more.

Get an education that will pay you.  My wife has 2 degrees, she is incredibly smart.  The reason she has 2 degrees is because her first degree didn’t do anything for her.  Couldn’t get her a job, she went back to get her nursing degree when she realized that she needs a paycheck.  Don’t go to college or university just for the sake of going.  Find someone with the lifestyle you want and find out what they did to get there.  Was it a trade, advanced degree, connections?  I have found that the most successful people I know are always willing to help others who ask for it.  So ask questions to them, find a mentor.  I went to trade school to be a mechanic, dreaming of working on muscle cars and exotics.  After a few years of dealing with oil leaks on minivans and every one I worked with over 40 telling me to get out before your body stops working as well I started working elsewhere.  Although I am not in the trade right now it has helped me immensely.  Trades and apprenticeship are often overlooked but there is always work somewhere for them and the shortage of labor is astounding.  Go where the work is.

Lesson: Get an education that will pay off.

Networking is the key to every opportunity that I have ever had.  The power of knowing people is everything in this world, they can help your problems and you can help with yours.  Build relationships with everyone because you never know who they will end up being to you.  I remember someone telling me early on, if you help enough people get what they want, then you can get what you want.  Sometimes my wife will ask me why I am helping some people get a job or with a project and I know its because the world gives back what you put in.  There will be a time when you need help, the world is full of crisis’s, financial, health personal.  I have a big network that I know I can call on if I do need help and now some come with opportunities.  I have learned that the rich get richer because of who they know, if you get to know rich people the world opens up for you then you can pass that on to others.

Lesson: Help everyone you can and build a network of successful people.  Get a Mentor.

You can have anything you want, just not everything.  Find what you want and go after it, when you concentrate on something its amazing how the world comes together to make that happen.

Reader Profile: LN

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 LN. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I’m a 27 year old female, single and live in a large city. I work as a nurse, so my job is pretty secure as long as people continue to get sick. I went back to school for my nursing degree in my mid-twenties, so what little savings I had accumulated before that point were used for school/living expenses (we were not allowed to work during my program). I started my current (and first) nursing job a little less than two years ago, and it was 6 months ago that I really began to focus on budgeting and saving. I currently share an apartment with my sister, so we’re able to live pretty cheaply in a fun (and otherwise expensive) part of the city.

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

Average Take-Home Pay: Post-tax and insurance pay is about $4100. I’m an hourly employee so it varies based on if I work overtime or take vacation.

Monthly Expenses:

• $725 rent
• $175 utilities/phone/internet/TV
• $80 gas and auto expenses (I live very close to work)
• $20 renter’s and flood insurance
• $300 food (includes eating out)
• $95 gym membership
• $30 charity
• $270 misc. expenses
• $640 savings (this is what I budget for, but it’s usually closer to $800)

Discretionary: ~ $1,750

Assets:

• 2003 Honda Civic - paid off
• Old 401K - $2,900 (in the process of rolling this over to an IRA)
• Cash Savings - $13,000 (divided up as below)
• Emergency fund - $7,000
• Travel fund - $600
• Xmas fund - $300
• General Savings - $5,100
• Cash - $3,000

Debt: NONE!

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

I just finished paying off my students loans this last month. (yea!) I’d been paying about $800-$1100 per month because I wanted to get rid of them quickly for my own peace of mind. Now that I have that extra money freed up every month I’m not sure the best way to allocate it. I’ll also be getting a raise next month, which will give me a bit more money to work with as well.

My long-term savings is obviously lacking, so I’d like to tackle that first but I’m a little more afraid of putting money in the market as aggressively as I had been with paying my student loan. I’m also a bit naïve about where to put my money in terms of specific funds. I’m reaching the two-year mark at my work which will make me eligible for a 6% match on my contributions to our 401K, so I intend to use that as soon as it’s available. I’d also like to max out my IRA. Beyond that I’m not sure if I should put the excess in short-term savings, the market or some other financial option.

I’m also wondering what people think the best option is for saving for a house. I know that you are able to take money from a 401K penalty free if it goes toward your first home, but I’m not sure if this is the best place for me to put that savings or not. Just to clarify, I’d be putting money in this account specifically for this purpose in addition to retirement money, not taking money from my retirement allocation for a house.

What are your plans for the future?

I have many plans! In the next 1-3 years I’d like to replace my sturdy Civic for a newer vehicle. At this point I’m planning to let fate decide the exact time based on when something major breaks. I’d also eventually like to get a home, but probably not for another 5-7 years as I’d like to live in a few different places before settling down. I’d also like to go back to school for a master’s in nursing within the next 10 years (preferably closer to 5). They have a lot of options through hospitals that provide partial reimbursement for education expenses.

Also, the flexible schedule in nursing makes it fairly easy to go to school and work at the same time, so I don’t anticipate there being a huge change in my financial situation, but I’d like to have some extra money set aside for this anyway.

What is your best piece of financial advice?

I love using percentages. When I first started budgeting this year, I broke down what percent of my income was going where every month. Then I was able to see if this was in line with what was important to me in my life. For example, before I started tracking my finances I had been spending A LOT of money eating out and hardly any money on travel. But I enjoy travel so much more than I enjoy food! So I started allocating a certain percent of my income every month toward travel, and if I don’t use it that month it goes in my travel savings. Because of this (and again, the flexible work schedule) I’ve been able to go on three trips in the last two months.

I’m also a huge fan of getting rid of the feeling that I’m “checking account rich.” Anytime I see that my checking account has gone above the average amount I keep in there (and I know I don’t have a big expense coming up) I immediately get rid of it into savings or paying off my loan. This way I always end up saving more than I budget for without really feeling it, and the temptation to spend it on something frivolous is taken away.

Reader Profile Update: BB

Here's an update from BB's Reader Profile posted last July.

A lot has happened since my original reader profile (I'm a 25 year old guy with almost no responsibilities, I guess it's expected). Skim my original profile to get the background! In short, I have been very lucky and owe so much to my family for how my life has turned out.

The comments on my reader profile had great advice! I took most and acted upon them:

• found a new job
• moved to the Bay Area
• simplified my funds within my retirement accounts
• didn't touch my retirement accounts to time the market, dollar cost averaging still happening
• have a nice list of 501(c)(3) candidates for my contributions
• maintained a relatively frugal lifestyle and high savings rate

But some of the bad things I did this year, sometimes against the advice:

• allocations of my assets are still not where they should be; too much cash, not tax efficient
• rebalancing does not happen regularly across my assets

I suppose I will give my current financial outlook and then a more detailed account of things that have happened in the past year.

Financial Outlook

My new base income is $100k (+$30k/42%). But after bonuses and benefits it is closer to $120k (+$40k/50%). Total annual savings should be around $52k (+$11.5k/28%).

The following monthly expenses are all good estimates given that I have moved the beginning this year to a new city. These numbers are still in flux because doing my taxes will have a large impact, but it should paint an accurate picture. Some of my own comments will follow them.

Budget/Actual Spending (i.e. ceiling):

• $8330, income
• $2675, income taxes
• $1690, retirement contributions (maxing trad 401k, others, $ 500, employer match (first 6%))
• $ 240, health/dental insurance (HDHP, HSA compatible, $ 240, health/dental insurance reimbursement (wire transfer from employer each month))
• $ 730, charitable earmarks
• $  15, renter's insurance
• $1400, rent
• $  40, utilities
• $   0, cell/data plan (employer pays directly)
• $  20, car fuel
• $  20, car parking fines (unjust but practicly impossible to fight)
• $  40, car insurance
• $  20, public transportation
• $  25, groceries
• $ 190, restaurants
• $ 180, alcohol/bars
• $  30, coffee shops
• $  80, travel (3 planned flights to visit family per year)
• $  20, shopping
• $  35, entertainment (music, cover charges)

Spending (exclude retirement): -$5,760

Income (exclude retirement): $8,570

Savings: $5,000

In the past year I splurged on:

• $1880, broken bone surgery
• $ 650, flight home for a grandparent's death
• $ 200, supplies for bedroom's loft/desk I built
• $ 130, hammock
• $   0, homebrewing, wised up before starting this hobby

Significant Assets (rounded off):

• $41,940, roth IRAs
• $12,000, trad 401k
• $ 5,000, trad IRA
• $ 9,400, HSA (pseudo-retirement account, storing medical reciepts)
• $ 9,600, brokerage
• $14,000, savings
• $13,000, emergency fund
• $ 6,860, checking (3 different institutions)
• $ 1,800, car (basically cash-even trade when last car got totalled, thanks over-coveraged insurance!)
• $ 1,600, physical assets
• $ 7,000, bitcoins

Total Assets: $122,200

I'm not really breaking down allocation here. I know it is not where it should be. I like the idea of an 80/20 stock/bond split, rebalanced every 2 months. Also need to make it tax efficient by placing things like muni bonds outside of retirement accounts.

Liabilities (rounded off):

• $ 750 student loans (had basically a full scholarship)
•     $1400 on my credit card currently (it's in the middle of the month.. sounds about right)

Net Worth: $120,050 (+$59k/97%)

Allow me to comment on some of the above:

    (1) The "charitable earmark" amount gets direct deposited into an online banking account which I do not include in any of my financial tracking. I've made some very minor donations so far this year. I am thinking of mostly donating securities (or bitcoins) to additionally avoid the capital gains taxes.
  
    (2) Taxes will be quite interesting this year and next. As it stands, I will have a tax bill of a couple thousand, unless I itemize. I didn't have much income for Jan (took a month off of any work) and I ended up under-withholding most of the year. I haven't made the large charitable donations yet, so I could hold off on large charitable donations until next year. Though I did have some moving expenses and home office expenses though. Need to find a CPA asap I think; how do I find a good CPA?
  
    (3) Rent is a big shocker, of course, moving into San Francisco. The property is about average, but is in a trendy part of town a few blocks from the nexus of it all and in fact the surrounding area has a lot of low-income households (allegedly, even though the real estate is worth millions). Rent control sucks, economically. I have three other roommates to split the $5300 4br/1ba cost. I love being able to walk everywhere and can find something to do in the city at any given time. Rent ends up being 30% of my take-home pay (and less in terms of net or gross). However, after this lease is up, I will reconsider my options.

    (4) The walkable/bicycle lifestyle is the best. Would be nice if I could get rid of all my auto expenses, but realisticly I think it's cheaper to keep my car in reserve for the uncommon trips I have to take for work or convenience.

    (5) I really suck at feeding myself. My home-cooked meals are mostly oatmeal, milk, coffee, eggs, and rice along with the odd exception. Meals out are a lot of mexican, pizza, or similar (though twice a week I go to an actual well-rounded resteraunt). I'm actually looking forward to Soylent coming out to replace all my lunch meals and maybe some of my dinners; alledgedly both healthier and cheaper. All my roommates typically eat out (a month after moving into our apartment, the only thing in the refridgerator was beer and take-out chinese).

    (6) I have a girlfriend now! We've been dating a couple months. I woud say I pay for about 80% of our combined food/drink costs, practicaly limited to the weekends (since she lives about 30 minutes away by rail). She is living the frugal student life and I don't mind picking up these bills. We really like each other and she is a really good match to my personality but if I were to be forthcoming I'm slightly hesitant about her wit, it's not as sharp as would be ideal. She laughs with me but sometimes for the wrong reasons? :/

    (7) I lost about $400 in the brokerage account shorting stocks; I would be up by $1000 if I had just bought an index fund. I consider this my speculative, play money. But really, it's not that fun any more (like it would have been back in 2008 or 2009) with the government inflating the markets, therefore I think I will be transferring this money back into savings and allow my bitcoin holdings to serve as my speculative allocation. Bitcoins are way more interesting; I am converting about $900/mo into BTC, so far I have about 40% unrealized gains in terms of $USD. It may be wise for me to donate bitcoins directly to charity (instead of cash from my savings) to avoid some capital gains tax. Maybe I will look into have a self-managed IRA to be able to hold bitcoins in there?

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

Things are looking good, just like last time!

However, there are some additional items (not covered above) I really need to focus on:

    (8) Affordable Care Act is realistically causing my individual healthcare costs to double while not giving me personally any known, visible benefit (I shopped for the best HDHP plan early this year, and just recently compared it to healthcare.gov plans before the exchanges went live). My employer should be able to pick up the extra cost, but this is something I will need to look into in the next month. If my employer was not footing the bill, I would seriously look at my options of forgoing health insurance and pay the fine. I could foot probable emergency bills like a sports injury and if I were diagnosed with a longer-term illness I could apply for health insurance the next month to pay for treatments.

    (9) I still feel very passive (in a bad way) in my young career, investing, relationships, and social life.

    (10) My job gives me a lot of freedom and flexibility, but I haven't really taken advantage of the freedom yet. I could be more outgoing and do extra work to help my career within the company, or get some side-income or side-projects (CA is employee friendly in terms of IP rights) but instead I mostly waste time on the internet in my down time.

    (11) SF is a great place for me right now with all the opportunities out here; though it is a sort of bubble versus the rest of America. Also, definitely not for raising a family. This is not really on my horizon but worth noting. Would like to build my own dream home once I am "settled down." Will probably move back to the South, closer to home, in the long term.

    (12) The JOBS act passed recently. I here I can invest in early stage companies now without being an accredited investor. That's pretty interesting and worth thinking about.

Recounting the past year

A hail storm totalled my car but luckily I was over-insured (thanks Mom!) and the insurance company wrote a check for $1800. Went car-less for 2 months (attributed to my laziness) mostly using my bicycle (in a city ranked in the bottom 5 bicycle friendly cities in the USA). Eventually bought a used sedan for $1800 (great engine, pretty shoddy everything else, like no AC in the South). Ultimately I should have bought an economy pickup truck for the extra usefullness.

My roommate moved overseas with about 3 or 4 months left on the lease. Couldn't find a suitable replacement after a couple weeks and succumbed to laziness and just ate his share of the rent ($400) for the remainder of the lease. So ammitorized, my year-long lease was $500/mo, not $380/mo. The extra privacy was slightly addicting; I could see myself getting used to that.

I had a preventable bicycle accident which left me with a scarily broken collar bone. Paid for the surgery out of my emergency fund and saved the reciepts so that I might withdraw from my HSA at any point in the future with no penalty or taxes.

And, of course, I got a new job! Not at a "renowned" company like I thought might happen, but rather a smallish company based in Europe in desperate need of someone with my skill sets to work with customers in Silicon Valley. It's a fairly niche sector involving low level software but has some extra attention lately in the media. I'm no longer doing as much r&d work directly, but still working on the cutting edge and getting interaction with many more engineers directly involved in the field.

I used a lot of the personal finance and career advice that I learned from FMF and other websites to negotiate a better job offer. Firstly, I interviewed at another company in my town in parallel and actually got an offer there, an offer that ended up making me do a triple-take (for a single 24 year old), that I could use as leverage. The initial offer from the European company came in and it felt like a huge let down compared to the local one. However, I strapped in and prepared for negotiations: I knew they really needed an engineering presence in the US and I was the easy, ideal fit for them. And I wanted to work with them (and in Silicon Valley at that)!

I created two new sheets for 2013 in my annual financial spreadsheet document and filled them in with my my two job options. The conclusion was that my main concerns were the high rent costs in San Francisco (I had decided that if I move to Silicon Valley, I'm going to experience some culture, knee-deep) and the diminishing take-home income caused by progressive income taxes (feels like 2 steps forward, 1 step back). I came up with a number that I would be very happy with, in terms of net cash flow. Seriously, it kind of boggles the mind why any company would pay to have their main workforce in California instead of somewhere like Texas, Tennessee, or Washington.

Armed with everything I needed, I sent the head of engineering my concise, clear counter-offer and reasoning over email, along with a request for him to call me at his convenience. My email covered:

•   Thanked him for the offer, I'm glad we all agree I would be a good fit.
• Expressed that I had researched what the market salary for someone with my experience doing similar work in the bay area was, especially at some of the company's clients, and that this offer was not aligned.
• I had a more competitive offer from a well-known company locally (and much cheaper cost of living).
• Gave him the high level factors like 2.3x rent costs, the state income tax, etc. If I took this current offer, my net cash flow would be reduced by 50%, comparatively. Offered to share my calculations.
• To reach the same level of net cash flow, the number is X (was something crazy like 35% more).
• Also worried about the healthcare costs (the offer just mentioned there would be healthcare available), currently my premium is very low.
• Suggested that instead of covering my relocation expenses up to Y, be changed to a Relocation Bonus of Y
• Ended with making it clear that this was my #1 choice and I would hold off on accepting any other offer until I hear back.

He emailed me back his counter-counter-offer later in the day and called me soon after. This offer he said was a final offer and he had to go to the board of directors for approval (it was outside of ranges for the position):

• $ 100k, base salary (negotiated from $90k)
• $  10k, sign-on bonus (negotiated to be a bonus instead of relocation expenses)
• $<=15k, discretionary bonus (came from $10k->$15k in negotiations, I considered it as 5%, realisticly)
• $   6k, 401k matching (first 6%)
• 4 weeks vacation

And after starting work it is also true that:

•     individual health insurance is reimbursed completely
•     smartphone and plan are paid for directly by company

This offer resulted in my net cash flow being quite healthy, though still lower than the other offer I had outside of CA. However, I sort of skipped the fact that my Total Savings is quite higher with this job and I will be donating more to charity! Also, did I mention there was a good chance I would be mostly working from home?

I accepted the offer and took a month off between jobs since the last month of rent was pre-paid. This was a really fun period of time before flying to Europe for orientation. The orientation went really smoothly as I was very familiar with all the technology and my coworkers and I got along well. While in Europe, I took the opportunity to rent a nice bicycle over a weekend and tour the coast and some mountains, stopping for the occasional coffee with a view. Really a great, company-paid, frugal, mini vacation. When I came back to the USA, I kept my moving costs very low: packed up my car, sold/donated the rest, drove across the country making a small detour to visit some family, lived with family in the nearby area while searching for an apartment and roommates, and finally furnished the new apartment frugally (garage sales, thrift stores, diy).

The first few weeks on the job I had to commute to Silicon Valley fairly often so I logged my miles to customer sites. Not sure if my company will be reimbursing me for my mileage (so it might just be a tax deduction) because I haven't brought it up since being close and available to customers is kind of part of the job. However, things settled down and now I work from home most of the time.

Very soon, I will be interviewing (much older) engineers in the area to be my colleague for a new project in the company. I saw that their expected salary is something around $150k and I am actually not exactly impressed by their technical abilities as presented on their resumes. Definitely an engineer-employee friendly market out there right now. I'm not sure if this new hire will mean the company will finally get an office and require me to commute more often.​

Thanks for reading and I hope to get even more, better advice from this update!​

Reader Profile: GB

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

Please tell us a bit about yourself.

My wife and I are both in our early thirties.  I used to work in IT and she is a physician.  I never finished more than ~40 hours toward my undergraduate degree, she finished school a few years ago.  After we got married we moved to Boston and worked for three years, then moved back home to the south to settle down.  I am going back to school full time and she is working full time.

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

A somewhat brief history that I think is beneficial to know: When I was 23 and still messing around in school part time I had some sort of crisis where I realized I was spending money toward a liberal arts degree and that had nothing to do with IT.  I quit school and tried to get back into a “real” full-time IT job because I was stuck in a dead-end job where IT wasn’t even half of my work. 

In a moment of frustration (I am imagining FMF wincing as he reads this) I gave notice at the job and started looking for work.  It was a huge mistake and cost me over a year of misery and debt…but eventually I found a permanent job. This job paid maybe 25k a year, but at the end of that six months I had paid off most of the $4000+ credit card debt I had accrued.  The best part was as terrible as the job was, it allowed me to network and I found a much better job. 

The new job offered me a permanent position after six months, and then a promotion after a year.  Meanwhile my girlfriend had earned three degrees that only cost her 44K in student loans due to scholarships.  We got married, moved to Boston, and after two years there I got a great promotion and raise.  At this point I had basically tripled my salary in four years... I was ecstatic.

During our three years in Boston we lived on my income and saved everything my wife earned (she earned a little less than me).  We ate out only on special occasions, walked or took public transportation almost everywhere, barely used our old car except for trips around New England, and traveled to Europe during off-peak season.  We paid off 25% of my wife’s student loans, fully funded our Roth IRAs every year, and saved up over 100K for moving back home and buying a home.

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

We are frugal people…so we don’t really know what to do with our money other than pay off debt and max out our retirement funds.  For example, we received an inheritance and used it to pay off my wife’s student loans (there was about 28000 left).  This may have seemed like an odd choice considering we had a mortgage, but it has been great freeing up the cash flow.

As you can see below…just about every penny that comes in is allocated somewhere:
 
Income

• Me: 0 /mo (unpaid internship + school!)
• My wife: ~9250/mo take home after tax and 403B etc. 
• 12000-20000/yr in bonuses (this is buffer money, it is not allocated for any purpose.  In the past we have used it for extra mortgage payments or in place of the emergency fund)

Monthly Expenses / Savings: ~9250
 
Monthly Expenses

• Mortgage: 3100 (it’s actually 1500/mo, we pay 1600 extra)
• Groceries, dining out, bars: 700
• Car: 420
• Utilities: 400 max (water, electricity, gas, cell phones, internet, alarm system)
• Clothing, Shopping, misc.: 350
• Gas: 150 max (2 cars)

Monthly Savings / Escrow accounts

• Roth IRAs: ~915
• School: 800 (will go down to ~500 at end of this year)
• Charities: 585
• Property Tax: 450
• My wife’s continuing education: 350 (conferences (incl. travel), courses, licensing)
• Insurances: 330 (life, disability, car, home)
• Home Improvement: 300  (ends this year, we are going to have some small work done)
• Vacation: 200
• Gifts: 200 (niece/nephew college funds, Christmas, housewarmings, weddings etc)

Assets

• 138,000 equity in house bought in 2011
• 92,000 in various retirement accounts (my wife maxes out her 403)
• 81,000 in two Roth IRAs
• ~30,000 Emergency Fund in a simple savings account
• ~24,000 in various savings accounts that are escrowed for annual costs listed above such as school, vacations, insurance, home improvement projects, charity
•  ~19000 in checking
• 2 cars, one paid off (14 years old now)

Current (and future) debts

• Mortgage: 172,000 remaining at 3.25%.  At this rate will be paid off in 2018.
• New car from 2011: 420/mo, paid off in late 2016.  15900 left @1.9%
• New car at the end of this year: Early graduation gift I suppose.. replacing the 14 year old car.  ~500/mo

We prioritize our money as retirement, then mortgage. 
 
What are your plans for the future. (retire early, build your career, etc.)?

My plans revolve around starting a new career, most likely in research.  Other then that we feel like we’re pretty set on what we want... work, save, and travel.  I graduate from undergrad in 2014 and grad school in 2016 (assuming I do not decide to pursue a PhD), and hopefully join the workforce shortly thereafter.  However, once I start working and we are no longer eligible to contribute to Roth IRAs, we don’t really know what to do to save for retirement other than max out our work retirement accounts.  We are not interested in having children, so that is not a necessary savings goal.  It is also our hope that once the house is paid off and /or I’m working, my wife can cut down to four days a week to pursue other professional interests.

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

Self-control is everything...I think that applies to every aspect of personal finance.  Motivation is also important; make charts in Excel so you can see those pie charts fill in and numbers reach 100%.  Celebrate major accomplishments in whatever way you can afford... a nice dinner, a fine bottle of bourbon, or a new toy.

Force yourself to not eat out; that may be the biggest drain on someone who is trying to save (especially in their 20s).  If you do want to join friends for food and drink, eat before you go out so you can have a couple of drinks without breaking the bank.  Half of my cooking repertoire can be made in 15 minutes and it is healthy, so we never can use “oh I’m so tired and hungry I don’t feel like cooking”... make leftovers for lunch or for when you really ARE too tired.

When you do NEED or even want to buy something, price-stalk it.  For months if possible... especially if it is something that you just want.  I once price-stalked a video game for months just to save $8, since I was in no rush to play it.  I knew it would drop to $20 eventually; I just had to be patient.

If you are going to get married, do not go through with it until both of you understand all aspects of the other’s debts and ideas of spending.  Marriage is insanely easier when you rarely fight about money.  Similar to this - an emergency fund allows you sleep easy at night and shrug off money bombshells, especially if you are a homeowner.

Automate it all.  As you can see above I have escrow accounts for even the tiniest of things so I never think about it.  So when I look at our checking account I don’t need to worry that suddenly $4000 is coming out of it next week to pay my tuition.  That $4000 will go out but I’ll transfer from the savings to cover it.  I like that our checking account reflects the “true” balance.

Reader Profile: MK

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 MK. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a 28 yr old female. For the past five years I have been living in Washington, D.C. and am currently the office manager for a small law firm. I finally started getting my act together 2.5 years ago when I began using a budget. I started an emergency fund, got out of credit card debt, and started making extra payments to my student loans. I also started saving for retirement. I am single and living in a two bedroom apartment with a roommate.
 
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.)

Income: $3480 take home pay/mo (I just got a significant raise two months ago, so my take home is up about $300 which went a little to lifestyle inflation ($100), but mostly savings/retirement)

• Rent: $1295 (includes all utilities, cable/internet, and parking)
• Student loan: $480 (Minimum payment is $270. All loans are 2.75% and under)
• Cell phone: $75 (I have to have the data plan for my work email)
• Car & Renter's insurance: $80
• College: $50 (saving money to help cover my little sister's book expenses when she goes to college next year)
• Food (groceries, restaurants, alcohol): $420
• Gas: $100
• Personal care/entertainment/household: $130
• Slush/Vacation Savings: $250 (used for irregular expenses such as new clothes, car repairs, yearly vacations, gifts, etc.)
• Retirement (Roth): $450 (about 12% of my after tax income)
• General Savings: $100 (a chunk of this ends up going to the charity that I also volunteer for)
• Christmas: $50

Additional info: I have a car, but it's been paid off for three years and still runs pretty solidly, so I am hoping to get another 5 years out of it. My employer pays an amount equal to 5% of my salary into a profit sharing account each year.  I do not have access to a 401K. Due to income limits I usually can only put a small amount into a regular IRA for a little tax break, so instead I put the rest into a Roth.
 
Assets:

• Emergency Fund: $6,000
• General Savings: $2,000
• Slush/Vacation Fund: $1,400
• IRA: $3,500
• Roth: $9,000
• Profit Sharing Plan: $11,500

Debts:

• Student Loans: $19,000 (started at $45,000)

I contemplated moving to a less expensive apartment this year, but after figuring in the moving fees, increased driving expenses, and how far out I would have to go to pay less (the DC metro area is expensive and the commuter traffic is horrific), I decided to stay put another year.

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

I feel like I have a pretty good balance, but I am struggling with whether to be more aggressive with my student loans even though they are at 2.75%.  Part of me thinks instead of paying the extra amount I should be putting the money in an investment account since I can likely beat that in the market.  But part of me also hates having that debt over my head and it could be paid off in 3 years if I continue at this rate.

I am also trying to deal with not getting sucked into too much lifestyle inflation. It's hard not to say yes to every dinner and night out, since a lot of my friends spend every penny they make or just have a higher income than me.

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

To complicate my life, I am considering a career change.  I am currently volunteering 16 hours a month with an organization that helps women and children dealing with domestic violence and homelessness.  I love working with the clients and children, and it is definitely the highlight of my week.  I am considering going to work for the organization full time, but it would involve a pay cut of nearly 40%.  It would be a huge lifestyle adjustment and would basically be like starting over. 

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

Use a budget!  People think that it is a naughty word, but it really helped me get my life under control.  I feel so much better now that I know where my money is going. It also allows me to splurge occasionally and I love paying all cash for any vacations (as opposed to college when I just charged them because I thought I "deserved" it).  Also, save early.  I wish I hadn't gotten into credit card debt in college and instead gotten on the PF train sooner.

Reader Profile: MP

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 MP. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I'm a single, 26 year old living in Washington DC. I've lived here for 4 years though I'm originally from a southern state. I worked in politics right out of college and soon realized that career path was not for me. I quickly regrouped and have been in a good, yet not very challenging, admin/sales position for the past 3 years. I've received one promotion, merit-based bonuses and on average an 11% raise every year. I've stayed longer than originally planned due to the fact that I feel valued by my colleagues and managers. However I cannot shake the feeling that I'm not challenging myself to take the next step in my career. Franly I am fairly over-qualified for my position and need a real change. There is no real room for growth at my firm due to its size, so I'm at a bit of a cross-roads.

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

I live within my means though I could cut my spending more. My parents set a very good example for my siblings and me by being open about the fact that they never took on non-mortgage debt. With their encouragement, I finished college without any student loans through scholarships and I carry no personal debt. However, right after I moved to DC I did overspend and had no savings to speak of. I kicked that behavior and started my 401K and Emergency Fund approximately two years ago.

Income:

• $57,000/year
• Bonuses around $5000/year

Assets:

• 401K: $22,000
• Emergency Fund: $7255
• Other savings (marked for purchases, gifts or travel): $1100

Expenses:

• 401K Contribution: 15% (including employer match)
• Savings Contributions: $600/month
• Rent: $1022/month with 1 roommate. This is super low for my location.
• Utilities: $20 - 70/month depending on the season
• Health insurance: $30/month
• Renter's Insurance: $13/month
• Cable/Internet: $70/month (I would LOVE to get rid of cable but my roommate does not agree
• Groceries: $300/month
• Gym: $79/month
• Entertainment:  $600/month (This mostly includes going out to eat and to bars.)
• Travel Budget:  $100/month  
• Gifts: $50/month
• Miscellanous (toiletries, home maintenance items, clothing, irregular expenses): $200/month

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

I consider myself fairly frugal. I don't have a car, I walk to work and bring my lunch everyday. However I struggle with finding the balance between saving for the future and enjoying an active social life in my twenties. I would like to cut some of my entertainment spending and use that money toward a more productive purpose (read: not toward alcohol!).  Unfortunately I feel social and personal pressure to spend more than I'd like. I have an introverted nature but I am social and have a large group of friends. I tend to never initiate social gatherings but almost always say yes when invited. Would appreciate some suggestions on how to socialize on the cheap without feeling like a loner.

I am also struggling with a general lack of direction. I'm comfortable with my emergency fund so it's time to move on to saving for specific goals. The problem is I do not know what my goals are right now. I would eventually like to purchase a home, but I don't want to buy in DC since I don't want to live here long-term. I am also torn between going back to school and looking for a new job. I am studying for the GMAT and considering business school. I think an MBA program would allow me to learn a lot about myself and my career options while opening doors to new opportunities. However I am petririfed of going into debt and the opportunity cost of a full-time program. My employer does not offer tuition reimbursement.  Finding a new job would cost less up-front but I'm not sure if it would set me up for as much long-term earning potential (and long-term job satisfaction) as a graduate degree would. Also I don't even know where to start looking for a new job considering I'm not sure what exactly I would rather be doing.
 
Reading over this I am realizing how paralyzed I've been. I tend to think through decisions very carefully but sometimes that means life marches on while I'm deciding. I'm ready for a change and would appreciate any and all advice!

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

My long-term plans are to build my career and set myself up for financial independence. I'm still up in the air about how exactly to achieve these plans, obviously. Eventually I would like to settle closer to my family though I'm not sure I'm ready to make that move yet. I love living in a large city but the hustle and the cost can get to me. Conveniently, cost of living is much cheaper in my home-region, so I would be setting myself up for financial stability (provided I can get a well-paying job in that area).

My short-term plan (which is not set in stone) is to apply (and hopefully be accepted) to a good, but not totally out of my league so I can hopefully get a scholarship, MBA program in the South. I am hopeful that this would open doors for a good job in my home-region and set me up to be closer to family.

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

Live within your means. Also avoid lifestyle inflation. As soon as I get a raise or bonus I adjust my automatic transfers to keep my monthly budget roughly the same.

Reader Profile: WC

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

Please tell us a bit about yourself.

I am a male, 25 years old, with a Masters in International Development. Born and raised in N.Y.C, I recently took a job with a Federal agency in D.C. in the general field of Economics. This was a big move since I had always lived in New York. My parents emigrated from the Dominican Republic to give my brother and me the opportunities they lacked. Last but not least, I proposed to my long-term girlfriend and am set to get married in November 2013. It’s been busy!

A bit of what I will share is speculative—my fiancé is currently working in NYC, with her monthly take-home pay at $2100. She is looking for work in DC currently, so we don’t know what our combined income will be. She is 23 and has no form of debt. Importantly, we do not plan on having children for at least 5 years, if not longer.

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

As a Federal employee, I’m on the GS pay scale. As a GS-9, my salary is 51K this first year. Next year, it jumps to 63K as a GS-11 and the following year to 75K as a GS-12. The ladder at my current position stops at the GS-12 level, with 3% yearly increases thereafter. After one year as a GS-12, I am eligible to apply to GS-13 positions. My current position involves the Chemicals and Energy industry, and I plan to leverage my experience in my next position, possibly in the private sector (utility company, major oil, etc.) if not another Federal agency.

I have debt, as so many Millennials do. I owe 37K in Federal student loans at 6.5%; living in Virginia, I purchased a new car (this was a mistake, I know this now) and owe 19K on a 6 year loan at 4.2%. I have 5 ½ years left on the car note; I plan to own it at least 10 years. Lastly, I owe my parents 4K. I have no credit card debt; I have an excellent score.

The wedding is in NYC, and my fiancé and I have taken steps to ensure that our spending is under control and that everything is paid in cash. Our respective parents helped some, but my fiancé and I are paying for the majority of things. We will have 10K in savings after we come back from the honeymoon as a cushion while she looks for work. A caveat on my move to the DC Metro Area: I have been living with relatives, paying $500/mo for rent, food and utilities. This is extremely generous, but will change once I move to the apartment (September 2013). The fiancé and I chose to live in Arlington, VA to be close to the District.

The apartment we found is a true bargain—$1280/mo with parking and utilities included (water, electricity and gas). The average price for a 1 room apartment in the area is $1600 without utilities.

My take-home pay is $2500/mo after taxes,  paying for medical/life insurance and contributing 5% to my 401K and 2% to a Roth IRA. In addition to an automatic contribution of 1% of my gross salary, my employer matches the first 3% at 100% and the next 2% at 50%. These accounts are under the Federal government’s Thrift Savings Plan (TSP). Next year, I’m thinking of increasing my contributions to 8% (401K) and 7 % (Roth IRA). Below is my monthly budget.

Budget ($2500 Take-Home Pay)

Fixed

• Contribution – 160
• Rent – 1280
• Student Loans – 435
• Car Insurance – 175
• Cell Phone – 110
• Cable, Internet, Home Phone – 100
• Total: $2260

Variable

• Gas – 100
• Laundry – 40
• Food – 300
• Metro – 100 
• Total: $540

Total Fixed and Variable: $2800

As you can see, I have a $300 monthly shortfall. Once my fiancé lands a job, this will change dramatically. The plan is to either save/invest or pay my debt with the majority of her income. Any thoughts on what our course of action should be are welcomed.

Net Worth

Assets

• 401K/Roth IRA – 2,500
• Savings – 10K
• Total – 12,500

Liabilities

• Student Loans at 6.5% – 37,000
• Car note at 4.5% – 19,000
• Parents – 4,000
• Total – 60,000

Net Worth: -47,500

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

The big issue we are facing is whether we should put all our excess money towards my debt, as Dave Ramsey suggests, or follow the pattern I’ve set of saving while paying down debt less aggressively. I think contributing to the 401K makes sense because of the matching funds. Other than that, I am not sure if we need to be saving anything besides an emergency fund? My hesitation is the compound interest we would earn by starting earlier. Thoughts?

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

My future wife wants to start her Masters in the next 2-3 years. Her dream school is Georgetown ($$$). At this point, I would want her to work while she studies, but there are many unknown variables (school, program, cost etc).

Fortunately, my job is low-pressure: 40 hours a week with a consistent monthly cycle of responsibilities. Therefore, I am looking to secure a second source of income for the middle of 2014. I am looking to break into the real estate market, perhaps into home inspections. I have an acquaintance with his own company, and he would train me. Also, I am looking to go into possibly index investing next year. I hear great things about Vanguard; any suggestions on an aggressive growth index? What is a suggested initial investment?

By 30, I’d like to earn 6-figues and be debt free. By our mid thirties, we’d like to purchase a home (20% down, 15-year mortgage). This is really going far out for us, (10 years) but it’s never too early to start thinking.

1 Year Goals:

• Set up 6-month emergency fund of 17K
• Begin investing in an index fund

5 Year Goals:

• Tithing
• Be debt free
• Live off of 1 income (After 2 years of being married)
• Earn 100K/year

These goals are subject revision—we are young and in need of guidance.

As a long-term goal, my fiancé and I want to build wealth and eventually be financially independent, able to give back to others the blessings we have received. I love real estate, and see it as an entrepreneurial opportunity. 

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

I am learning the discipline of patience in saving and living below my means. Although our consumerist culture makes it difficult to do this, the FMF community shows that it’s more than possible. Thank you!

Reader Profile: BY

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 BY. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I’m 28 years old, single, female and live in Phoenix, Arizona. I work in audit/compliance for a large corporation with a good sense of job security at this point. I work from home and travel in the Southwest region 4-5 days a month, so I’m able to save a lot on food and gas (on the company’s dime while I travel and easy access to make quick meals at home during the work day).

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

Income: Base Salary $72,000/yr + ~$8-10k bonus (pretty well guaranteed), Side hustle brings in between $6,000-$9,000/yr (adjunct faculty for a local university)

Monthly Income: $4200 from base salary plus anywhere from $200-$660/month from side hustle (varies greatly)

AVERAGE MONTHLY INCOME: ~$4500 (conservative side hustle income amount included)

MONTHLY EXPENSES:

• $1800 mortgage
• $370 utilities (electric, water/trash, home security system, cable/internet/phone)
• $261 student loans (minimum payment)
• $90 food/treats for dog (have to special order hypoallergenic food due to allergies)
• $80 gas (work from home so save a lot on gas)
• $150 food
• $300 miscellaneous/fun
• $30 gym membership
• $3,081 total monthly expenses

Discretionary: ~ $1,400 per month

Assets

• 2009 Toyota Camry - paid for
• IRA - $15,100
• Investments (TD Ameritrade account)  - $8,300
• Cash Savings - $7,000

Debt

• $260,000 mortgage @ 4.62%
• $20,700 student loans (@7.75%)
• No other debt

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

The current financial issues I am facing are whether or not I should pay off my student loans ASAP, put more into my investment account, or contribute more to retirement. I would love to hear different thoughts on what I should do in regards to this!

I am currently paying the minimum on my student loans while throwing an extra $500-$1000 at it when I feel like it. I recently moved into a new-build home and had been saving, saving, saving for house related items (a few new pieces of furniture, décor, landscaping, etc), but now that that is over, I need to decide whether or not I want to attack my student loans and get these paid off within the next year or keep saving money. I am sick of paying interest on my student loans, but at the same time, I am single and want to make sure I have plenty of savings should something unexpected happen. I have a decent amount of cash savings and investments (that can be made liquid very easily) but think I should have at least $30k there. Any thoughts? 

I currently work for a large corporation (since February of this year) and do not anticipate any problems with job security in the foreseeable future, although nothing is guaranteed.

I am very cautious and constantly stressed over money because I have seen my parents have very little (we were on subsidized lunches in elementary school off and on with 5 kids in our family and my parents not planning accordingly), to then having a lot of money when my dad got into a very lucrative field (when I was in middle school & high school) and saw them spend frivolously and overextend themselves beyond words, to now having very little again due to the downturn in the economy back in 2008/2009 and having given or let them borrow thousands of dollars over the past several years.  I have seen it all with my parents and although I am doing fine financially, I live in fear knowing that you never know what life will throw your way and don’t want to make any of the same mistakes they have made.  I have never taken financial advice from my parents and have more or less learned everything on my own by reading blogs like Free Money Finance and doing my own research on goal-setting for financial freedom.

What are your plans for the future?

I would love to have children at some point. My boyfriend (see marrying him at some point) and I have discussed this, and I am perfectly fine having children in my thirties (I don’t want an entire basketball team like my family – maybe 2 or 3). I want to have all of my student loans paid off, plenty of money in the bank, etc. before taking on that responsibility. The house I recently purchased is one I see staying in for the next 10+ years – it is much larger than I need right now, but has room to grow and is not a stretch for me to cover financially.  I plan to continue working once I have children as well, although probably not necessarily full time.

What is your best piece of financial advice?

Set goals – both short term and long-term. For me, I need to see the big picture, but what keeps me motivated is hitting those goals that are more near-term and tangible.  Keeps me going and committed to financial freedom.  I set up little challenges for myself related to my financial goals – I like to feel the sense of accomplishment and this keeps me going. Also, I try to let myself splurge every once in a while and buy a nice pair of jeans, go out to a nice restaurant, etc. – this keeps me sane. :)

Reader Profile: VA

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 VA. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a 29 yr old female. I currently live in New York, NY and have lived here for six years. This city is expensive! My situation has improved a lot over the last two years, due to a higher salary and better managing of my finances. But I know I still have a long way to go. I am single.

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

Income: $3200 take home pay/mo, post-deductions (health insurance ($100), subway card ($112), 401k ($420) are monthly expenses deducted pre-tax.)

• Total After Tax Expenses: $2382
• Rent: $1285 (soon to be $758)
• Utilities (electric and gas): $60
• Student loan: $170
• Newspaper: $15
• Food (groceries, restaurants and bars): $430
• Travel: $222
• Other: $200

This leaves savings of about $800/mo. I also receive an employer match to my 401k of about $200/mo. My employer pays for my cell phone, and I do not have internet or cable service at home.

Assets:

• Emergency Fund: $5000
• Investments: $5000
• 401K: $10,500

Debts:

• Student Loan: $5000

I've decided after two years of living alone that I can no longer afford it. Next month I will be getting a roommate -- savings of $500/mo!

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

By getting a roommate and increasing my cashflow by $500, I need to decide where to allocate the extra money. I feel that I'm behind on retirement saving and will likely increase my contribution by 2%. (Current is 8% with a 4.5% match). Next, should I pay off my student loan or put more into my emergency fund and investments?

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

I plan to continue to "catch up" and aggressively save. It would be great to develop some side income as well. As far as the living situation, I don't know how long the roommate arrangement will last. I would like to move in with my boyfriend eventually. However that worries me as he has a large amount of law school debt, over $100k. I also worry about my long-term prospects in this city, as entering the real-estate market seems impossible. I do love it here and enjoy my job, perhaps it's worth the sky high rents. My overall goal is to save as much as possible to give me more options.

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

General philosophy is to spend where it counts. I love traveling and occasional restaurant indulgences. However my lifestyle is simple, free of gadgets and "stuff". I learned some financial lessons a little late in the game, and I wish I had saved more in my early 20s. Save early!

Reader Profile: JS

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 JS. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I'm a 35 y.o. Single female living with my three cats, yeah I'm a crazy cat lady, in the "bad" part of the same state as FMF, near Detroit.  I work downtown and live in one of the inner suburbs.  I've lived here for a whole 5 months.  I have a new 3 bedroom 2.5 bath "city house" on a 40x110 lot which means I can mow my lawn in 20 minutes.  My neighborhood is a mix of old tiny bungalows and houses like mine where 900 sq ft bungalows were torn down and replaced new space efficient slightly larger houses (1500-2000 sq ft.).

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

I prefer not to say what I do only that I've worked for the same employer for 13 years now and Detroit is my 3rd office, I was in New York City and Middle of Nowhere GA prior to this my employer paid for both of my moves.  I'm in a pretty specialized field one that I get to retire early from and am pretty much at the top of it without going into management.  My current base salary is $130,000, I am sometimes required to work weekends and holidays and am compensated for that as well.  My employer also provides me with a car for work, but only for work I am allowed to drive it to my home but cannot use it to drive someone like a family member around in it or even to stop the the store for milk on my way home from work.  My employer also still offers a pension, I expect to receive 35-40% of my salary depending on when I retire.

I'm an accidental landlord, and rent my old co-op apartment in Bayside Queens out to a long term, they are renewing for a 5th year, tenant for $1,500 a month.  My parents and I also co-own a vacation place that we rent out when we aren't there to subsidize it's cost, we don't make money on it and never really intended too.

Assets:

• Primary residence $291,000
• NYC Co-Op  $210,000
• Vacation place (1/2 value) $125,000
• 401k:  $287,000
• IRA:  $62,000
• Emergency Fund  $24,000
• Short term savings Fund:  $18,000
• Non-retirement investments:  $21,000
• Available for whatever:  $2000-5000 depending on the time of the month
• Pet Emergency Fund:  $9,000

Monthly Expenses estimated:

• Primary Home Mortgage $2,200 a month and I owe approximately $223,000 on a 15 year mortgage at 2.375%  I'm accelerating slightly my payoff actual due is approximately $1,600 with escrow.
• Condo Mortgage:  $645  (again half of the amount we owe $54,000 total) NYC Co-op Maintenice:  $850 Utilities (gas/water/cable/power estimated.)  $250 Cell Phone:  $65 Retirement $1916  (Maxed out 401k and Traditional IRA which is converted to a ROTH IRA yearly)
• Food:  I'm not really sure up to maybe $500 and that includes eating out and pet food.
• Fuel:  $100

I budget by scarcity, when I'm paid I have automatic transfers that move money from my checking to my savings and investment accounts, what's left is what I have to live on for the rest of the month so I tend not to pay to much attention to single budget categories.  I also tend to put most of my living expenses on my Visa and look to it to see if I'm spending more than normal which I have been for the last few months as I'm settling into my new house. 

The Pet emergency fund started as one of those automatic transfers so that if a larger bill came up I wouldn't have to make a financial decision instead of an emotional one.  I don't know if I'll every used the whole thing or if I'll use it and more.

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

It's just in the past 6 months to a year the I finally feel back on track to where I wanted to be finically 5 years ago when I became an accidental New York landlord.  I bought my NY co-op thinking that I knew all the important things about the complex.  For those of you who've never heard of a co-op basically it is similar to a condo except instead of owning a specific unit, I won 330 shares in the complex which entitles me to a permanent "lease" of my unit.  What it means in reality, there is a 3rd party in all sales, buyer, seller and the co-op board.  What I didn't know when I bought was the complex has a floor price for sales (which may be illegal court rulings have gone both ways) and I was trying to sell it in 2008 when prices were falling.  I had 2 sales that fell through in the year I had my place on the market before it went to either for sale of for rent and I got a renter before I got a sale.  At first I was losing about $100 a month, then my adjustable rate mortgage adjusted down and I made a bit, Last fall I paid off the mortgage for personal not fully financial ones.  Basically cash flow, I wanted more money available monthly that I could apply to other things.

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

I'm currently beefing up my short term savings, I want to get that up to about $50,000 so that I can buy my next vehicle, I drive a 2000 Jetta, in cash.  I'm also planning on taking my first major vacation ever next year, I'm looking at 2 weeks in Europe.  After I get my short term savings where I want it I will be turning my focus to really funding my non-retirement investments which I think are low for my income level.  I do still add money to my investments each month but not as much as I want. 

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

My #1 personal philosophy when it comes to finance:  I have all of my needs covered and most but not all of my wants; therefore, my financial decisions are all about evaluating my wants.  I make a great salary but I also can see myself spending it all on stuff that really isn't all that important as well.  When I decide that I "can't afford" something it's not about what I didn't buy but instead it's about what I now can buy that I want more instead.

Reader Profile: KC

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

Please tell us a bit about yourself.

We are a small family of three; myself (age 49), my wife (age 49), and our son (age 17). My wife and I have been married 21 years and both have been with the same employer for 25 years (public education). We have lived in the same house for over 20. In other words, we have a very stable existence.

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

Financially, I feel more secure now than at any point in my life. Our income, before taxes, is 115k per year. Our only debt is the house, which we just re-financed at 3% for 15 years. We owe 106k on it and probably have only 25k in equity. The new 15 year mortgage pushed us back four years (we had 11 years @ 5%). My decision to extend the loan was not an easy one, but ultimately came down to cash flow as our monthly payment dropped $330/month. (I still am not sure that this was the best decision; payment dropped, less interest, but paying off the principle at a much slower rate). This (reduced mortgage payment) is money going towards college savings.

We carry no balance on our credit cards, but use them extensively to accrue frequent flier miles (have paid no interest in 4 years). All three cars are paid off and will serve us for years to come. We have 20k in cash savings for emergency funds that will ultimately go towards my son’s education. I am keeping it in savings, as the stock market bubble has not burst yet. Plus, this money may be used in the next 12-18 months and I want it liquid. We have another 20k in annuities and a Roth that will also go towards college (they can be withdrawn early, without penalty, if used for education). My wife and I both have state pension plans (11.5% of salary is contributed annually), so retirement is being taken care of.

As a side note, just five years ago, we had no money in savings and lived paycheck to paycheck. We also had a considerable amount of consumer debt. I did not sleep well in those days!

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

Our biggest challenge right now is college savings. I would like to pay as much as possible, but have discussed the plan of 1/3s with our son. Mom and dad pay 1/3, 1/3 in loans (that he is responsible for), and he works jobs for the other 1/3. Fortunately, our son is very bright and has (or will have) knocked off a year or year and a half of college while still in high school due to dual-credit classes. At $20k per year for a state school, this is a huge advantage. He also will likely qualify for a state scholarship (due to grades and SAT score) that is 6-9k per year, renewable. However, he wants to enter a program that requires a graduate degree, so his college years will be extended. We are currently putting away $1000- 1500 per month for college and retirement (apart from our pension accounts).

Our current monthly expenses:

• Mortgage 834
• Son’s health insurance 118
• Cell bill 77
• Utilities 200-300 (water, sewer, gas, electric)
• Satellite/internet 110
• Fitness memberships 70
• Cash 600 (gasoline, personal care, son’s allowance, etc)
• Groceries 700 (our son eats A LOT)
• Household 700 (toiletries, beauty, entertainment, junk)

I keep a very strict budget and have tracked expenses since 1995 in Quicken, so I have a very good handle on where our money goes.

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

Retirement can come as early as age 52 for my wife and I. If we wait until 54 (30 years in the pension plan), the pension is considerably higher. I am thinking seriously about retiring at 52. I am a school principal and the job is taking its toll on me. Although I would retire from education, I would not quit working. There are no health benefits in the state retirement, so I would find part-time work to assist in paying for that and I am definitely too young to sit home and watch Oprah. My wife will likely continue working until 54, or beyond, at her current position. I have calculated that our pensions will allow us to live in a similar lifestyle as to what we currently enjoy. Social security would be a bonus.

I do not anticipate ever paying off my house and living in it rent-free. We have discussed several options for retirement; my wife’s family has a tremendous amount of property in the South that we could retire to and live cheaply (free). In fact, much of the land is leased or in government programs and produces income. My wife and I have also discussed retiring abroad; Ecuador, Belize, or parts of Mexico (contrary to news reports, most of Mexico is safe). We have travelled extensively to these areas, but fully understand that living there is very different from vacationing there.

No decisions will be made until our son graduates college (he is a high school senior this fall) and gets settled in a career.

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

Do not get caught in “Keeping up with the Joneses”. Before the crash in 2007/8, many of our friends were buying huge SUVs, huge homes, boats, etc. They were way over-extended. Many conversations seemed to focus on what everyone else had and were buying. The crash resulted in several divorces and bankruptcies among our close friends. We almost made these mistakes too, but were fortunate to avoid them. Because of this, we weathered the recession unscathed. Live below your means!

In addition, take care of your credit score. Ours hovers between 770 and 815 and because of it, our last three car loans were at 0%, 0%, and .9%. Use sites like Credit Karma and Freemoneyfinance to educate yourself on how the system works.

Reader Profile: KW

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

Please tell us a bit about yourself.

I've always had an interest in personal finance from a very young age.  I read books about investing, finances, and even majored in finance in college and work in finance & accounting as a financial analyst.  In fact, I made my first investment in the stock market when I was in 7th grade, so it's embarrassing to admit that somewhere along the way I screwed up and I need the help and suggestions of your readers.

I graduated college just before the recession took a grip on the economy and managed to get a good job offer at $50k/year plus an $8k sign-on bonus.  Although I graduated about $30k with student loans, I managed to pay them off in two years.  Unfortunately the economy was too rough on my employer and my position was eliminated in a layoff, but I did get a generous severance package and found a new job within 2 months that came with another sign-on bonus.  Around this time I also collected on a five figure legal settlement and took advantage of the $10,000 first-time home buyer credit.  Things were going great and then I got married in September 2010....

You see, I knew my wife had student loans, but I didn't' find out the exact $ figure until a month before our wedding.  She estimated the student loans to be around $30k which I was not happy with, but willing to accept.  When we looked up the actual figures, it was nearly 3X that amount!  I was shocked and so was she (she was totally in the dark as to the loans she signed up for because her parents did all the paperwork and all she did was sign her name).  To make matters worse, her degree is in early childhood education which means her career options are extremely limited.  The choice is $10/hour working in a daycare or $33,000/year (if you're lucky) with benefits as a public school teacher.  After a year of searching, she was lucky to find a job as a public school teacher, but with a monthly payment of over $700/month on the student loans, the income simply can't justify the student loan balance.

Unfortunately for me, between huge tax credits, sign-on bonuses, and legal settlements, I was getting many one-time payments that padded my bank account and I guess I had lifestyle inflation.  I was spending more than I made each month and was able to get away with it for years because of all the one-time mini-windfalls, but now that my savings has dried up I'm hitting reality.  I analyzed my actual spending on Mint.com and found that I was spending about $2-3k/month more than my income which also explains how I accumulated $19k in credit card debt in just a few short months.

In response, I made myself a budget to help get my spending under control but I'm still coming up short even after making draconian cuts even under the newly revised budget (see below).  What can I do?  I'll be 29 in a few months and my wife will be 27.  Please help by leaving me some feedback in the comments!  I promise to read all of them!

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

Both my wife and I work full time. Here is our budget (please note that I took annual and seasonal payments and divided them by 12 to show a monthly cost even though I'm not actually paying all these expenses every month):

Income

• My Wages (net): $3,106.32
• Wife's Wages (net): $2,201.74
• Rental House Rent: $552.00

Expenses

• Non-Home Debt Service Total: $2,318.60
• Student Loans - Wife: $700.60
• Credit Card: $1,618.00
• Note - the credit card payment is what I need to pay to pay off the balance before my 0% APR interest expires in May 2014

Home Expenses Total: $1,298.56

• Mortgage $650
• Allowance for Repairs/Maintenance $277.50
• Property Taxes $258.33
• Homeowner's Insurance $46.42
• Pest Control Service $35.63
• Lawn Weed & Feed Service $30.68

Rental House Expenses Total    : $691.74

• Mortgage $287.69
• Allowance for Repairs/Vacancy $200.00
• Property Tax $65.00
• Home Insurance $64.67
• Water Bill $55.00
• Lawn Weed & Feed Service $16.46
• Permits $2.92

Auto Expenses Total (we have 1 car we share): $442.15

• Gas $304
• Tolls $55
• Insurance $53.15
• Oil Changes & Estimated Maintenance $30

Food Expenses (2 people) Total: $515.00

• Groceries $350
• Fast Food $75
• Restaurants $90

Utilities Total: $424.50

• Mobile Phone & iPad 3G $185.79
• Electric & Gas $120
• Water Bill $60
• Internet $55
• Home Phone $3.71
• Cable TV (can't afford) $0

Everything Else Total: $510.42

• Vacations $250
• Pets $75
• Miscellaneous $50
• Life Insurance $100k/30yr - me $20.42
• Life Insurance - Wife (can't afford) $0
• Electronics $30
• Personal Care/Hygiene Items $20
• Clothing $25
• Gifts $25
• Medical/Doctor $15
• Charitable Contributions (can't afford) $0   
• Entertainment (can't afford) $0

Net Income: +$5,860.06
Net Expenses: -$6,200.97

=    -$340.91 monthly shortfall!!!! (help us)

Here is our household balance sheet:

Assets: $221,000

• Home $99k
• IRA $29k
• Rental Home $27k
• 401k $20k
• Collectibles/Physical Investments $12k
• Stocks $9k
• Emergency Fund $9k
• Car $7k
• Rental House Emergency Fund $6k
• Bank Account $3k

Liabilities: $185,000

• Home Mortgage Debt $74k
• Student Loan Debt $69k
• Rental Home Mortgage $23k
• Credit Card Debt $19k

Net Worth: $36,000

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

We are facing several financial challenges:

#1.  We are overwhelmed with debt - student loans, mortgages, and credit cards.  This is making it difficult to just simply survive.  I feel like we have little room in our budget to make cuts, but I'm looking forward to reader feedback for suggestions.

#2.  My annual raises have averaged 2% per year with my last raise being only 1.0%.  After Medicare taxes going up 2% and increases in health insurance, I actually have less income in 2013 than I did in 2012.  Throw in the rampant inflation (see Shadowstats.com) we have today despite the government telling us otherwise, I feel very discouraged especially considering I'm supposed to be on an upward path in my career...which leads me to believe that maybe it's time to change employers, but that brings up problem #3...

#3.  We live in a "Rust Belt" mid-western town (like a mini-Detroit) where white collar jobs are few and far in between.  If I'm to find another job, it will either require a 2-3 hour daily commute round trip (plus we'll have to buy another car and pay all the associated expenses with it) or we might need to sell the house (in a down market) and move...but the problem with moving will be a loss of my wife's income (and she would have to restart on the timeline to get tenure) which will be very difficult to replace considering how many applicants apply to become public school teachers.  The town we live in also has a low cost of living index, so anywhere we move will mean higher expenses across the board.  Then there's also the whole problem of figuring out what to do with the rental house that is in the same town we live in...sell it or try and manage it from afar?

#4.  My wife has no retirement fund whatsoever, we have little to no money in the budget to save for retirement, and I'm only putting in the minimum into my 401k to take advantage of my employer match (first 3% is match dollar for dollar and then the next 2% is matched at 50 cents on the dollar).

To help deal with these challenges, my wife and I are thinking about both taking on second jobs, but we also feel like we have no energy at the end of the day after our first job.  I'm at my current employer 50-60 hours/week.  We also don't like the prospect of taking a second job working retail for $8/hour.  My wife has tried selling Scentsy on the side, but we're losing more money than we make.

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

My wife's ultimate goal is to have children, but I told her we simply cannot afford the additional expense while we're dealing with such high debt service payments.  I think it really bothers her and adds stress to our marriage. 

My ultimate goal is to live debt free and be financially independent enough to take several mini-retirements throughout my life to travel and experience the world and still have enough left over to live comfortably.

I would like to stop being dependent on an employer for my income and be my own boss, but I'm having trouble coming up with business ideas that would work for a financial analyst like myself.

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

If you want something, ask.  If you don't ask, they will never know you want it and you just might get it!  This strategy always seems to help me get discounts on things when you otherwise would have never though you could negotiate a discount.

P.S.  Please leave me some constructive feedback in the comments because my wife and I would really appreciate your suggestions!

Reader Profile: Joseph

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

Please tell us a bit about yourself.

My name is Joseph, I'm 35 years old, and I live in Montreal, Quebec, Canada. I am single and been single for the past 1.5 years. Before that, I was in a relationship for almost 4 years which ended badly. I live in a 1 bedroom condo that I purchase in 2008 and I've been an on-and-off reader of FMF since 2010. 

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

Since I live alone, I am the only breadwinner. :-) I work full-time as an ERP business analyst for a retail company. I’ve been there since April 2013. Previously, I was an ERP Consultant working on my own. And since the demand for my services declined dramatically over the past 2 years, I was forced to get a full time job instead of focusing on my consulting career.

Monthly Income

• Salary - Approx. $4000
• Total - Approx. $4000

Monthly Expenses

• Car - $280
• Car Insurance - $115
• Condo Mortgage - $1000
• Condo Insurance - $40
• Condo Fees - $240
• Property Taxes - $230
• Life Insurance – $20
• Electricity – $50
• Gasoline – $160
• Groceries – $300
• Internet (ADSL) – $45
• Housekeeping – $90
• Visa - $50
• MBNA - $500
• Line of Credit - $150
• Capital One - $150
• Savings - $580
• Total Expenses = 3420

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

My main issue is obviously debt. I have too much of it. I made a lot of mistakes growing up and I’m paying the price for it today. I was spending too much, not saving at all! Living the high life! Happy hours, going on trips, eating out every day, buying designer shirts, and the list goes on and on. I was making a terrible mistake and I was too young, immature and ignorant to realize it.

I discovered Dave Ramsey’s teachings a few years ago and I’ve been following his plan. It’s not always easy but I try to stick to it as much as possible.

I’m currently on Baby Step #2, the debt snowball. I recently completed my Emergency Fund of $2000. In my opinion $1000 is not enough when you have a mortgage.

My total amount of debt is about $25000 (without my mortgage). My mortgage is about $170,000 at 5.75%.

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

My plan is focus is clearing up my debt. It causing a lot of stress and anxiety and I cant wait to get rid of it!

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

I really like Dave Ramsey’s teachings and ideas. I don’t always agree with him but I do agree that finance is 20% head knowledge and 80% behavior. God knows, i had a bad behavior. And i’m definitely not in a position to give anybody some financial advice. But If I had to say one thing to say, say out of debt! No matter what it is, credit car, car loan, line of credit, etc! whatever it is. Get rid of it asap!

Reader Profile: TW

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

Please tell us a bit about yourself.

My wife and I are in our early/mid-thirties and have been married 11 years as of June 29th.  I am the father of 2.75 kids...that means we have one due in about a month.  The oldest is 4.5 y/o while the second one is 20 months.  I currently work as a Business Analyst for a very good company and have been here almost 8 years (1.5 years in my current position).  My  undergraduate education is in General Agriculture and obtained an MBA in 2008...how I went from farming to tech is a long story but I wouldn't mind getting back to my roots some day.  My wife holds a Ph.D. from the University of Michigan and currently teaches Chemistry 4 nights a week at the community college.

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

I am the main breadwinner working full-time while my wife works part-time anywhere from 2-4 nights per week.  Since she stays at home during the day this opposite work schedule means we don't have daycare costs which in our area is quite expensive.  However it does mean we effectively single parent most of the week since we are rarely together with the kids.  After annual bonus I gross ~$65,000 while my wife average gross wages are $12,000

We are also accidental landlords in that we moved 3 years ago due to neighborhood crime and are unable to sell the house since we are underwater (from $175K at the high to a current of ~$94K).  We effectively break even on the rent but have a special situation since we bought from a builder running a special to guarantee rent whether or not the tenant pays.  They have followed through since the first tenant they placed in the house didn't pay and was evicted after 6 months.  We have 3 years left in this agreement at which time we're hoping to sell because the numbers don't make a good rental.

I get a 100% match on my 401K up to 4% of my salary and contribute 4% getting an overall 8% after the match.  My wife is required to contribute 3% to a state pension that we will never get since she is a part-time employee but we'll at least get our contributions/earnings back at some point.  Aside from this we also contribute to an HSA and have a ROTH and a Traditional IRA from when we were childless and both working full-time.  Here is a look into our financials, noted items are savings for future expenses:

AVG TAKE HOME

• Salary $4,947.26/mo
• Rental $950/mo

AVG MONTHLY EXPENSE

• Expense $4,552.07/mo

EXPENSE DETAILS

• Tithe, World Vision $654.43
• First Mortgage $1,573.02 (includes HOA dues $51.50 & is high because refinancing snafu cleared escrow so we're replacing funds)
• Second Mortgage $950.38 (includes $40/mo to a maintenance/repair fund)
• Home Repairs/Maint. Fee $25.00
• Gas/ Electricity, Water, Mobile, Internet $371
• Grocery $550.00
• Gas, Insurance $354.16
• Car Repairs, Tags $45 (savings)   
• Clothing - Adults/ Children $20.00 (savings)
• Vet $20.00 (savings)
• Life Insurance, Long Term Care $143
• Hair Care $10.00 (savings)
• Subscriptions (Mozy) $7.00
• Gifts $20.00 (savings)
• Blow $125.00 (A buffer in the budget not actually spent every month)
• Entertainment $73.00
• Student Loan $109.58

ASSETS

• Honda CR-V $4,250
• KIA Sedona $17,300
• Primary House $192,500
• Rental House $94,000
• Household Items, Jewelry $10,700

SAVINGS/CHECKING

• Emergency $5947.49
• Lump Sum Savings $1,396.02 (highlighted categories above)
• Checking $3,474.63
• HSA $627.91
• 529 $2,282.06

RETIREMENT

• 401K $52,021.03
• ROTH $1,332.50
• Traditional $2,369.21
• Pension $2,302.53

DEBT

• Primary Mortgage $170,825.26
• Secondary Mortgage $120,142.10
• Student Loans $26,912.44

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

Aside from wanting to pay down student loans we are about to make a huge change that could significantly impact our financials.  We currently live in Michigan but all our family is in Oregon.  My dad passed away recently, my brother had his first baby, my brother in-law will have his first baby soon, and my father/mother in-law have failing health so we've made the decision to sell and move to Oregon.  We are doing FSBO and are currently under contract with closing set for Aug 29th.  With a baby due in June and two small kids moving/selling is real a challenge.  We are selling most all our stuff (furniture, clothing, second car, etc) to save on moving costs and will get some used items from my in-laws once in Oregon.  Even with this moving is looking to run us ~$5K.  While I am lucky enough to keep my job and work remote my wife is not so we lose her income which is significant.  We will also lose some ground to cost of living (COL) since Portland Oregon is estimated to be 15% higher. 

Another burden is our rental which has become an albatross.  We never wanted to become landlords this way but are stuck for now.  Our rent is guaranteed until 4/2016 (see above) but barely break even since we pay a management fee of 1 month's rent every two years effectively negating any net gain.  All we can do is wait in hopes of a recovery in the local market.  We currently owe ~$120K with estimated market value of ~$94K.  The mortgage is an ARM which has worked well for the past 10 years but rates won't stay this low (currently 3.25%).  We can't refinance since we are underwater and are not eligible for HARP/HAMP since we are not backed by Freddie/Fannie.  At best in 3 years we'll owe $109K but would need $117 to break even after realtor's fees and taxes.

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

I plan to build my career for now and have made steady jumps over the last few years to position myself to do so.  I've considered making a move to programming and have taken some into work via Coursera, Udacity and Code Academy.  It's slow going working full-time and caring for the kids.  With the move to Oregon it might be a good time to test the market to see if I can get another bump in pay/responsibility.

My wife and I have talked about getting back to my roots and starting a niche market farm venture.  Of course this requires time/money and space all of which are limited right now.  However, as we settle permanently in Oregon this will be a driving factor in where we live and how we structure our time/money.

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

Do it while you're young and childless.  Life before kids is much easier to control your time and your money...not saying kids are bad they just change the dynamic and you no longer have the flexibility of working odd hours or picking up side jobs at a moment's notice.  Work like mad before so you don't have to after.

Hone your focus and don't try to do everything at once.  We only have so much time and energy (both physically and mentally) so think about whether it makes sense focusing time/energy on not buying a $3 latte or is it better to make more money allowing you to enjoy that $3 latte.

Reader Profile: KP

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

Please tell us a bit about yourself.

I am a 29 year old single man living in the southern midwest region. I was very fortunate to have a good paying job right out of college in a city with a very low cost of living. I attended a public university where my four years on campus cost my parents and I a combined $25,000 (my parents paid $21,000 and I paid $4,000 with loans). This low cost was enabled through a combination scholarships and some federal/state grants. Through summer jobs I was able to graduate college with no debt.

My gross pay each year is $110,000. We do not have a 401K match, but do receive a profit sharing contribution each year (company stock; should be ~$10,000 this year for me).

If I stayed at my current company until age 55, I would be able to retire with a very nice net worth. However I am currently debating transitioning to a lower stress job in a different city.

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

Income

• $9,200 a month gross pay

Expenses

• $1,900 a month for mortgage + property tax + home insurance
• $100 a month for gas / car maintenance (benefit of driving a hybrid)
• $200 a month for food
• $200 a month for going out with friends
• $500 a month for charitable donations
• $150 a month for utilities
• $100 a month for employer health and disability insurance
• $60 a month for internet (no cable)
• $100 a month for home improvement projects (typically done by myself)
• $50 a month for clothing (I have a minimalist closet)
• $100 a month for hobbies
• $300 a month for travel (like to take trips to see family/friends)
• $200 a month miscellaneous (estimate)
• $450 a month for Roth IRA

Assets

• Home ($203,000) purchased in 2009 for 192,000 (including first time home buyers credit)
• 401k ($130,000) mixture of three ETF's
• Profit Sharing ($56,000) all company stock - will increase by $10,000 in July
• Roth IRA ($54,000) - Index Funds + a few individual stocks
• Cash ($40,000) - current checking ($15,000) + slush fund ($25,000)

Liabilities

• Mortgage ($102,000, 4.25% - 15 years)
• No credit card debt - paid in full each month
• No car loans - paid in cash for a new car in 2011

Net Worth

• $381,000

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

This may sound ridiculous, but with interest rates so low, my biggest issue is knowing where to park excess cash. My 401k is maxed each year as is my Roth IRA contribution. One reason my mortgage balance is so slow for only having lived in the house 4 years, is a do bi weekly payments and also made a one time $20,000 payment a few weeks ago. I am somewhat risk adverse, so I do not like to have too much money in the stock market. I do plan on doing about $5000 in home repairs this summer (new paint + driveway) which is why the checking balance is a bit high.

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

Longer-term I do not plan on staying in my current job until I hit 55. I am worried I would get burnt out and not be happy looking back. Over the past few years I have dabbled in side startups but nothing has worked out (part of my hobby budget). Ideally I would love to start a business and run it full time. I do wish to have a family in the future and be able to take future kids on trips (not just Disney but also international) as well as pay a portion of their college costs (maybe 3 years or something). When the family does start, I will front load the 529 plans as much as possible.

I have worked since I was 13 (my parents owned a small business and I was paid $1 an hour until age 16!!) and consider myself to be financially savvy.

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

Best advice: In college I read John Bogle's (Vanguard founder) book on index funds. The vast majority of investors should follow his advice and keep costs low by investing in index funds. Also never but a load fund; only no load funds.

My personal philosophy is money is nice to have but it won't make you happy. I'd rather have a middle income/net worth life with a happy loving relationships (family & friends) versus a high income / networth life without them.

Reader Profile Update: Jack

Here's our latest Reader Profile Update. Many of you asked for this type of post -- a progress report on where past Reader Profile readers are these days financially. I think you'll really enjoy this. (BTW, if you do enjoy it, you can submit your own update, hint, hint.) :)

Today's post is from Jack, who gave us his reader profile a couple years ago. Here's his update:

Well, it's been about two years since I did the reader interview.  I'll start by listing an overview of what's happened since:

• My wife and I welcomed our first baby into the family. Our little girl is a bit older than 1.5 years.  Besides being a huge personal adjustment (goodbye sleeping in on weekends), she's been a huge monetary adjustment.  First of all, we've started saving for college for her, with a 529 invested in a low cost Vanguard index fund.  Additionally, since my wife works from home, we decided that a nanny would suit our life best.  And finally there's the generally mont-to-month costs of a toddler.  (More on this below.)
• We've crossed over the 1M, then the 1.5M net-worth (incl equity) barriers. 1.0e6 USD was a big deal for me.  I felt like we were racing to a million, and I was scrimping and saving to get there.  When we started to get close, I would check it multiple times a day, watching how individual choices in the stock market moved the needle.  Once we reached a million, for the first time in my life, I felt like we had breathing room.  I relaxed, and felt like we could weather any financial storms that came.  Some of that money's locked up in 401ks, etc. that have penalties associated with them, but we keep a fair amount in cash (> 6month living), and liquid investments (>50% of net) that we can tap if needed.
• My career has leveled off. When I first started working at my company, I was kicking butt trying to get ahead.  I wanted more money, more prestige, and more responsibility.  Once I reached the extreme level of income I feel I have, I have slowed down.  Partially, I was a little burnt out, partially I felt safer (see above).  I took some personal time off from work recently to deal with my burnout, and came back with my batteries recharged.  I'm hoping to kill it in the coming years; however long that may be (see below).
• We're getting close to the magic number for early-retirement. I have always felt that 2M (liquid assets) was a magic number.  Based on the 4% Safe Withdraw Rate (SWR), and the fact that I'm sure we can live on 80k (pretax), we could be all set.  Right now, I'm tracking that number as late 2014 or early 2015, but there are a lot of unknowns in that date.

Financially, there are a lot things on my plate:

• Our outflow is staggering. I know we could live cheaper.  When I see that our expenses last year totalled approximately 100k (after tax), I am out of breath.  Admittedly, that includes childcare and prepaying the mortgage (which I don't do anymore since refinancing at 3.5%), but it's still a ton of money.  (Despite this, we still managed to save > 100k.)  If you break down the spending, there are things we could do to cut expenses, but we've been more focused on growing our careers than cutting costs.  So far, that's been the right strategy, but I think in the next year it might not be, because:
• My wife and I would like to have another kid. We've always felt one was too few, and she feels three are too many.  Biologically, we need to get on this soon.  I also think we're emotionally more prepared for it.  If we have another kid, we're likely to have my wife stop working.  This will save the nanny, likely save on taxes (AMT is a bitch), but we'll lose her salary and 401k (plus match).  Overall, I think a second kid will cost us at least 45k/year net.
• I like to invest in individual stocks, and I'm running out of investment ideas. With the tear that the stock market's been on, we're up a staggering amount of money this year.  I've been selling some shares as they get to what I think is, "fair value", but I'm running out of investment ideas.  We live in an area where I don't believe it makes much sense to invest in real estate, most bonds are artificially depressed, and I don't believe in commodity investing, so largely, our cash cushion is growing.  I'm investigating things like peer-to-peer lending, but so far haven't pulled the trigger.
• I want to start investment and retirement accounts for my child(ren). I believe in the power of compound interest.  Besides the (~18k) we have in our child's 529, I'd like to start putting money away in an investment account.  I want to grab some solid bluechips for her, and just let them sit there and drip for the coming decades.
• Early retirement is closer to a reality. My wife and I had always planned to work until we turn 45, at which point I had calculated that we could likely retire with about 2-2.5M in assets.  Again, at our current rate, I see us having enough money in late 2014, or early 2015 -- a full 7 years ahead of schedule.

Our plan for early retirement has always been a working retirement (you have to do something with all that time).  Likely I would teach, start a business, or work parttime at a library (or something similar).  My wife hasn't decided what she wants to do.  When I took my recent time off work, after I spent a week or so sleeping in, I found that my days were packed just getting stuff done, working on hobbies, and watching the little one.  Frankly, I wonder if I'll have time to work with all the other things I want to do with my life.

Our problems are not, "how are we going to pay off this credit card," but "how can we continue to build wealth?"  Our problems are first world problems.

We recognize that we didn't do it alone.  We have had help from our family: with love, stable home lives and our educations mostly paid.  We had a head start in life with that, but if you look at our net worth, it's largely been a factor of hard work and lucky decisions over the last decade.  We started that decade with my wife's house and my small stock portfolio (about 100k total between us both), and grew it dramatically over the last decade.  We focused on our careers and didn't give in too much lifestyle inflation (until we had a kid that is).

Charlie Munger (VP of Berkshire Hathaway) says that the first 100k is the hardest.  I agree with him here.  For us, it was hard for us to get to 100k, but once we got there, our careers were rolling, the compound machine was chugging, and we were off.

I don't really feel qualified to give anyone generic money advice, mostly because everyone's financial situation is different.  However, I can say what worked for us: starting lucky, working hard, and sticking to it.  When the market lost 50% of it's value in 2008-2009, we didn't sell, we bought more.  When housing crashed, we looked to buy a reasonable home in the inflated property market we live in.  When stocks run up, we look to pare our positions down.  I would say we try to keep the long view in mind and wait for the opportunities when they present themselves.

I have no idea what people will ask; but I welcome any questions and will be as frank as I can.

Reader Profile: YA

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 YA. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am a single 41 year old woman.  At the beginning of 2012, I was a single 40 year old woman who lived alone with her dogs and fostered more dogs for a rescue and had a full time office job.  Then I got the phone call.  My mother wanted to move away from the snow and ice of the north and could she stay with me until the house sold.  This move also included my father and my nephew whom they have been raising since his parents died when he was 2.  I knew this might happen one day since my father's dementia has been getting worse and my mother cannot take care of him as well as take care of my nephew and the house.
 
They all moved in and we tried to make it work but after 8 months I suggested that my parents move to a town nearby which is geared toward retired people.  I agreed to take over as guardian of my nephew and suddenly I became the mom.  I jumped in to eigth grade homework, teacher conferences, juggling school and work schedules and all that a kid requires.  It has been rough but we made it to summer and now I have 4 years of high school looming ahead. 

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

I work full time and my nephew receives survivor benefits which cover his basic expenses including food, gas and utilities.  I have a rental house which is paid off and managed by a company because I tried to manage it myself and it was too stressful.  This brings in approximately $800 per month.  My income is $2200 per month.  I have 4 acres of paid-for desert where an old mobile home and my RV reside.  I hope to build a small house and retire there one day.  I also have a 401K with around $100k which I don't plan to touch for another 20 years or more.

Here are my usual expenses:

Car reg. and ins.: $31.00
Gas: $200.00
Electric: $125.00
Trash: $17.00
RV reg. and insurance: $30.00
Internet: $45.00
Cell phone: $45.00
Christmas: $50.00
Mobile home prop. Tax.: $9.00
Land property tax: $78.00
Food: $300.00
AAA: $4.00
Life Insurance: $11.00
Dogs: $150.00
Water/sewer: $33.00
Mortgage: $540.00
Netflix: $18.00
Total: $1,686.00

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

I want to quit my job and do something more creative and flexible so that I can be involved with my nephew's life and help out my parents.  I have been blogging about my journey for 6 years now but I still haven't saved enough or gathered up the courage to quit my stable income.  Now that I am in charge of a teenager, I want to be more involved in his school and activities.  I find that I come home tired and grumpy everyday and I don't look forward to our time together which really is a shame because he hasn't reached that point where he is embarrassed to have me around.  That is rare for a teenager so I can't miss this opportunity to be a part of his life.  I only have 4 years!

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

1.  My first idea was to pay off my mortage in order to lower my expenses.  I would be able to get any part time job to pay my basic bills.  The problem with this idea is that it would take me 3 years to do it.  My nephew will be almost off to college by then.
 
2.  Next, I decided to save up enough money to pay for my basic expenses for the next 4 years.  I could get a part time job for extra money and possibly find a new career during this time because after 4 years I would need to get a full time job again.  It will take me until April of 2014 to save up enough money.  His freshman year will be almost over.  I am working on this plan but I want to do better.  So far I have $3,500 saved and a $10,000 emergency fund which also includes rental house maintenance.
 
3.  My third plan is to start an online store while I continue to work at my full time job and save for plan #2.  I'm the kind of person that needs a dozen back-up plans to feel secure.  I have begun the process and I hope to have my store up and running by August.  School starts at the end of July so I am trying to get everything ready before that.  It is my hope that my online store will generate enough income to equal a part time job.  That would give me the confidence to quit my job sooner.  Ideally, my online store will be so successful that I will make more money than I did at my full time job with half of the work hours and lots of flexibility.
 
4.  Because I want a more flexible schedule as soon as possible, I am considering asking my boss if I can switch to 3 days a week.  This is not ideal because I would rather leave outright than linger as a part time employee but I might need to do it for my sanity.  I am at the point where I don't have enough time to do anything well.  Everything is a trade-off.  Clean the house on the weekends or help my parents?  Ask my boss if I can leave early (again) so that I can attend a school function.  I'm using my vacation time a half day at a time just to stay afloat.
 
The problem is the uncertain future of health care.  I would lose my benefits and I am responsible for my nephew's health insurance too.  Right now I can buy a basic health insurance plan for $140 with a $12,000 deductible and a health savings account.  I have read that rates will rise for many states and I expect Arizona to be one of those states.  Should I stick it out until I know what the rates will be (I hear we will know in October) or should I just make the leap and try to go part time now? 
 
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
 
Spend more time with friends and family and find time to appreciate the free things in life.  I'm trying to follow my own advice but it sure is difficult to let go of the lifelines and reach for my dreams.

Reader Profile Update: Crystal

Here's our latest Reader Profile Update. Many of you asked for this type of post -- a progress report on where past Reader Profile readers are these days financially. I think you'll really enjoy this. (BTW, if you do enjoy it, you can submit your own update, hint, hint.) :)

Today's post is from Crystal, who claims she did a reader profile some years ago (though neither of us can find it). As such, she decided to do an "update" using the questions I normally ask for a profile. Here goes:

Please tell us a bit about yourself.

My name is Crystal, I'm 30 years old, and I live in Houston, TX with my husband, our two dogs, my younger sister who rents a room upstairs, and two of our friends that rent the guest bedroom downstairs.  Yeah, it sounds like a boarding house, lol, but it all happened sort of by accident and has worked well for all of us so far.  I've been a reader and commenter here on FMF since October 2009.  In fact, FMF himself and a few of you readers were the ones that encouraged me to start my own site, Budgeting in the Fun Stuff.

I submitted a Reader Profile a couple of years ago, but a ton has changed since then.  For example, I made the leap into self-employment in July 2011 and my husband joined me in January 2012.  I wrote a pretty popular eBook in July 2012 and it has sold nearly 600 copies.  I was also a speaker about self-employment at The Financial Blogger Conference last year. 

We paid off our first house earlier this year and moved into our new home late last year, so we still have a mortgage and property taxes, but we have a paid off rent house too.  The rental income from that house and our roommates covers our mortgage and both sets of property taxes plus a little extra.

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

I started Crystal For Hire in April 2011 when I started running blog advertising for others.  I was also staff writing for about 13 sites a week at one point in late 2011.  Between my freelancing and my blog income, I was able to quit my day job in July 2011. 

My husband joined me to help in January 2012 since I was getting burned out with 80-100 hour work weeks and he wasn't really enjoying his time in the public school system as a teacher and librarian.  Our business has had some big ups and some worrisome downs, but we have been holding to a steady income for about 2 years total.  Here is our full financial breakdown:

Monthly Income

• Online Income Average - $8000
• Rental Income - $2300
• Hobby Job Income (hubby is a varsity football and softball official and I am a Chick-Fil-A mascot kid cow) - $200-$1000
• Total - About $10,500 in a Low Month

Expenses

• Income Taxes – $2500
• New-to-Us Car Fund – $500
• Home Mortgage – $990
• Home Insurance/Property Taxes/HOA – $750
• Rent House Home Insurance/Property Taxes – $275
• Health Insurance – $360
• Life Insurance – $30
• Car Insurance – $55
• Electricity – $175
• Water – $60
• Natural Gas – $40
• Gasoline – $150
• Eating Out – $250
• Groceries – $250
• Sprint – $150
• Cable/Internet (DSL) – $110
• Medicines – $20
• Toll Roads – $25
• Housekeeping – $175 (average over the year)
• Lawn – $80 (average over the year)
• Miscellaneous – $200
• Cash – $100
• Total Expenses = $7245

Extra money is split up like this right now until our 2013 Roth IRA’s are taken care of:

• Roth IRA’s – 80%
• Rental Property Maintenance Fund – 10%
• Vacation Account – 5%
• Fun Money Accounts – 5%

When our Roth IRA's are fully funded, we'll be dividing that part up between a SEP IRA and more investments.

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

Not knowing how long we will continue being able to work from home is the hardest part of self-employment.  Financially, we know that we are doing really well right now, but online blog advertising could dry up at any time. 

We manage our income by moving everything from Paypal to a CapitalOne 360 blog income savings account (formerly ING Direct).  Then we pay ourselves $4000 biweekly from that account automatically.  $1250 of that is also automatically squirreled away for taxes, so we end up paying ourselves $2750 every two weeks to cover the rest of our monthly spending.  Whatever is left after our bills are paid is divided up like I said above.

We have a $10,000 emergency fund, $15,000 padding in our blog income account, and side accounts for a new-to-us car, home maintenance, vacations, fun money for each of us, and for future investments (to eventually be used in Scottrade, to fund a SEP IRA, or to maybe buy another rental property).  Our only debt is the $205,000 left on our current mortgage at 4%.

What would you do?  Invest in stocks (we like stable, high dividend ones like J&J), pay off the current mortgage, buy a new rental property, or hide as much as possible in a SEP IRA?

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

I used to make 30 year plans, but self-employment is a little less stable-feeling.  So our current plan is to ride this horse until it bucks us.  I love working from home for myself, so I think I could do this indefinitely.  Even if blog advertising ever dies, I can continue staff writing and writing eBooks (working on my second one now).  My husband seems to feel the same way but I sort of hope he finds something for himself that he likes even more since he still feels more like an employee than a co-owner.  He needs his own thing that makes him happy.  Maybe sports officiating at the college level or something like that.  We'll see.  Overall, our general plan is to become financially independent as soon as humanly possible just so we can choose what to do with our time from there.  Currently, we are aiming for that by age 45-50.

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

Keep your expenses as low as you realistically can.  The lower your monthly nut, the easier it is to cover.  At the same time, find something that you absolutely adore to do and make a business of it.  Self-motivation is a force of nature...it drives success more than I could ever imagine.  We actually haven't followed all of our own advice, lol.  Our expenses should be about $500 a month lower than they are now because of splurging.  But we also like the time our splurges buy us and the entertainment value, so at least our eyes are wide open.

When I started reading and commenting on FMF in 2009, I was planning to work a cubicle job for a car dealership software company until I was 55 years old for $35,000-$40,000 a year.  My husband planned on continue being a school librarian until he was 52 for about $48,000 a year before he could retire with a pension.  Now we are both around 30, bring in about $125,000 a year, and just want even more control over our time.  Between 2009 and now, we have pretty much changed everything about our lives.  Time is priceless and we just hope we are spending ours as wisely as possible.

Reader Profile Update: JM

Here's our latest Reader Profile Update. Many of you asked for this type of post -- a progress report on where past Reader Profile readers are these days financially. I think you'll really enjoy this. (BTW, if you do enjoy it, you can submit your own update, hint, hint.) :)

Today's post is from JM, who gave us his reader profile a year ago. Here's his update:

I enjoyed the participation and feedback we got from our reader profile in April of 2012, and I thought it would be fun to give a little update on the progress we have continued to make. Obviously, we have aged another year, and are both now 28.  Over the past year, we’ve kept up our good savings and investing habits to keep moving in a positive direction. When you combine that with the bull market we’ve continued to experience over the past year, the progress we’ve been able to make is much more than I forecasted a year ago.  We still have no family or pets other than ourselves, and have no plans for any additions in the near future.

First, here’s a snapshot of our net worth.

Assets:

• 401(k)s – $226,000
• Roth IRAs - $69,000
• Taxable Investment Accounts - $13,000
• Home - $135,000
• Rental #1 - $102,000
• Rental #2 - $140,000
• Cash - $100,000
• HSAs - $9,000
• Other Assets - $30,000 (cars, present pension value, etc.)

Total Assets - $824,000

Liabilities:

• Home Mortgage - $88,000
• Rental #1 Mortgage - $68,000
• Rental #2 Mortgage - $100,000

Total Liabilities - $256,000

Total Net Worth - $568,000

Our income is up moderately at work, where we bring in a combined $140,000 in base pay. We now have additional revenue streams from the rentals, which total about $24,000 a year. However, after expenses, only about 35-40% (roughly) of that revenue amount ends up as an addition to our net worth at the end of the year, but I expect this to increase as principal is paid down and rents are increased.

We have continued to max out our retirement accounts, and combining that with company contributions and market conditions, we have been able to increase their balances fairly significantly. Along with this, we have expanded our rental property holdings to include another single family home, which we have just finished getting “rental ready” and will likely have occupied by the time this posts. We are currently passively looking for additional property, but will only pounce on the deal if the right one presents itself. Our strategy is to purchase mildly distressed foreclosures which can give us instant sweat equity with some TLC. We continue and will likely continue to hold a large cash balance to take advantage of these deals which often require cash offers, since the instant 10-20+% return they can earn is far superior to me than putting it in a “safe” asset earning only a few percentage points. This may be a bit on the risky side, but I feel at this point in our life we are well positioned to take some calculated risks like this which have the potential to provide significant returns.

When our profile was originally posted, several readers mentioned that we ought to review our asset protection strategy, primarily in regards to insurance, as it seemed to be the one thing missing. I’m happy to report that we have added an umbrella policy to our insurance package. When you combine this with the fact that our rental properties are held within an LLC, I believe we have taken the appropriate steps to protect our assets from any claims. As our wealth and exposure to claims increase, we will continue to review and monitor our protection strategy and make the necessary adjustments.

One other comment, which I will admit got me flustered, was that we must have inherited some money. This is just not the case. As I mentioned at the start of the profile, neither one of us had any school debt due to our generous parents and scholarships. Other than that, it was all us. The “windfalls” we have gotten along the way that boosted us past where we would normally be with our salary alone were primarily due to educated investing and hard work. We both took extended out of office assignments at work, which can allow you to save additional money if you handle the situation correctly since all of your day to day costs are typically paid for by the company. We also received a modest bonus one year at work which we saved in its entirety, but when this is divided amongst all of our years of employment it was almost certainly a smaller bonus than many earn yearly. Other than this, it has just been saving a considerable portion of our salary, making every dollar count, and putting that money to work for us.

I expect we will continue to make good progress.  I realize we have been the beneficiaries of a large run up in the stock market, along with a recent modest increase in property values, so I expect our gains in wealth on a year over year basis will not always be as dramatic as they have been in the past few years.  While the markets may not continue the bull runs, with our comfortable emergency fund and diversified assets, I expect we will be able to reach our goal of financial independence in a reasonable amount of time, though we need to not lose focus and continue our habits. Our primary goal for the next few years will be to continue building cash-flowing assets in addition to our retirement funds to give us some career flexibility, and also take a little time to enjoy ourselves here and there. I thank everyone for the feedback and hope this update is beneficial to you all!

Reader Profile: CT

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

Please tell us a bit about yourself.
 
My wife and I are in our early thirties (32 and 33), have been married for almost 8 years, and have a 2-year old daughter.  I’m a mechanical engineer currently working at a power plant.  My wife is a licensed CPA, but currently stays at home with our daughter.  We currently live in a small (low cost of living) town south of Houston, Texas.  We both grew up in this area and have majority of both families within an hour drive.  Close vicinity to family was the main reason we chose to move back after starting our careers in Houston.

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

My income is stable, but total compensation can fluctuate a little due to overtime and annual bonus.  Current total compensation typically ranges from $125k to $140k.  The 401(k) match is 8.1%, is tier structured based on years of service, and tops out of 12.1%.  I’m maxing out to the $17,500 limit for 2013.

After paycheck deductions, my take home pay averages $6700 per month.

We are currently living in a small wood frame house that my wife’s father and grandfather built many years ago.  My wife is set to inherit the house and land, so we’re making payments to her parents so that it isn’t money out of their pocket to let us stay there (home insurance, property taxes, etc.).  My wife’s father doesn’t want to rent the place plus he gets free manual labor out of the deal (hauling hay, mowing pastures, mending fence, etc.).  The plan is to add on a room or two down the road (two or three years) and provide maintenance/improvements as necessary.  We are truly blessed to be in this situation.  It’s very sentimental to my wife, and I like taking on home improvement projects.

When my wife did work, we made it a priority to max out our 401k’s and max out our Roth IRA’s.  We still have this mentality today.

The financial numbers below are averages:

Expenses

• Rent/Property Taxes/Insurance: $260
• Utilities (electricity, trash, etc.): $175
• Communication (cable, internet, phone): $240
• Groceries: $350
• Dining out / Entertainment: $130
• Gas / Transportation (includes maintenance): $600
• Car Insurance: $175
• Life and Disability Insurance: $160
• Medical (doctor visits, medication, etc.): $130                   
• Charitable Contributions: $300
• Pets: $170
• Roth IRA’s: $916
• Other (clothes, toddler stuff, consumables, etc.): $1000

Supplemental Savings

• Savings Goal: $2000

Assets

• Land, Cattle, Farm Equipment: $130000
• Vehicles: $30000

Retirement, Medical, and Investment Accounts

• 401k’s: $152000
• Roth IRA’s: $147000
• Traditional IRA’s: $129000
• Joint Brokerage: $6600
• HSA: $24000

Liquid Accounts

• Checking: $12000
• Savings: $31000
• Emergency Savings: $20000

Debt

• NONE (hope to keep it that way)

What are the current financial issues you're facing (saving, paying off debt, etc.)?
 
Starting with the positive, my wife and I worked hard and stuck to our plan early in our marriage and careers.  We’ve been contributing the max to our 401k’s and Roth IRA’s since 2005 (with exception of my wife’s 401k when she resigned in late 2010).  In addition, we put our excess income toward paying down the principal on our first home.  When we sold it in 2011, we were able to pay cash for some land adjacent to the place we are living on now.  We took my father-in-law’s advice and also purchased a starter herd of cattle (he’s been in the cattle business for about 15 years).  I did not include farm/agricultural income because we’ve broken even the last two years.  With the recent years of drought here in Texas, cattle prices are high and diesel is still climbing…so adding to our herd or buying more pasture land will be a slow process purely for economic reasons.

Over the years, we have learned that saving the money is a strength of ours.  However, I’m not sure we are optimizing the ways our money can work for us and continually grow.

I manage our portfolio because my wife (CPA remember) is very good at taxes and bookkeeping, but shows very little interest in the investing side.  I follow a few financial blogs and have read numerous books to further educate myself, but I find myself sometimes emotionally reacting to market fluctuations and news speculation (I know…not a good thing).  I’m familiar with index fund investing, buy and hold vs. allocation moves based on bull/bear markets, and various methodologies (dollar cost averaging, lump sum investing, value averaging, etc), but sometimes I feel overwhelmed (especially as our portfolio gets bigger and bad decisions have potential to hurt more).  100% of our investment portfolio is with Vanguard.  I would love some pointers on various strategies to grow our nest egg over the long haul.  I’d even be willing to learn and try a combination of strategies for further diversification.  I believe I’m capable of understanding such concepts, but I need exposure to those who have the experience and knowledge of where to start, what to look for, possible tools to utilize, and how to stay on path.  I understand that time is on our side, and we can take on more risk, but a well-defined and thought-out plan would help me not second guess those decisions.

Some other questions include:

• whether Roth or Traditional 401k contributions are better for my situation?
• should we convert some of the traditional IRA to Roth IRA or vice versa?
• 529 vs ESA for college savings?

Our daughter is still young, but we would like to start saving for her college.  It’s really something that just came up in one of our conversations two weeks ago after attending a Dave Ramsey lecture.

As I mentioned before, we will be taking on some home improvement projects in the next couple of years.  These will be paid out of pocket as funding and schedule permits.

We have three paid-off vehicles (2000 Civic as work car, 2003 pickup for farm usage, and 2006 SUV for my wife).  As they get older and mileage accumulates, I’m sure we’ll be forced to replace at least the car or SUV in the near future.

We are currently building up the Savings account for the home improvements and potential vehicle replacement.  The ultimate goal is to try our best to minimize debt as best as possible.

What are your plans for the future (retire early, build your career, etc.)?
 
I know for sure that I will continue to advance my career by gaining experience in the power generation industry with focus on equipment reliability, outage planning and execution, and machinery (steam turbines, gas turbines, pumps, etc.) troubleshooting and diagnosis.  I’d like to see myself reach a point where I can retire and consult on a part time basis.  A few years back, I earned my MBA and became a licensed Professional Engineer, so hopefully I can utilize these once I get several years os experience under my belt.  Honestly, I don’t ever see myself ever not working.  I just prefer to be in the position where I can work on my own terms.

We’d like to purchase more land and expand our farm business such that it provides some supplemental income, but the ultimate goal is to provide a source for home grown food (beef, chicken eggs, venison, vegetables, fruit, etc.).

Obviously, we have a daughter to raise, send off to college, and marry away someday.

My wife may decide to take on a few clients for tax preparation and bookkeeping services, but that’s not in the nest egg accumulation plan for now.  This way, anything she does can be put back toward college or our daughter’s wedding or just makes us reach our financial goals quicker.

In the near future, we’d like to look for opportunities to give back to our local community and broaden our charitable work.

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

These sound like I took them out of the table of contents of several books I’ve read over the years, but they’ve worked for us.

• If possible, automate your saving and investing vehicles.
• Keep things simple.
• Live below your means.

Reader Profile Update: Mark

Here's our very first Reader Profile Update. Many of you asked for this type of post -- a progress report on where past Reader Profile readers are these days financially. I think you'll really enjoy this.

Today's post is from Mark, who gave us his reader profile over two year's ago. Here's his update:

I wanted to tell my bankruptcy story because I think we can sometimes learn more from failure than from success. And I have to admit, I'm getting bored with reading personal profiles on FMF.

I also wanted to talk about my bankruptcy because I think it really demonstrates that wealth building requires a certain amount of intellectual, emotional and psychological fortitude that a lot of people simply don't have. While it can be acquired, I think the posts on FMF demonstrate that people with certain personality types and personal backgrounds are much more likely to acquire and implement this knowledge than others. You'll notice the prevalence of engineer profiles on FMF...I don't think that's a coincidence. Most engineers are the INTJ Myers-Briggs personality type, and this personality type tends to be very good at saving and investing and preliminary case studies suggest INTJs are one of 3 personality types likely to retire early and be happy with the decision. See this link for details. http://www.retireearlyhomepage.com/mbti.html

For the record, I am also INTJ. For those of you who don't know about the Myers-Briggs personality types, you can read about them here.

And you can take the test here.

My original profile appeared on this blog on 4/26/11 and I'm happy to report I continue to make progress saving & investing.

I would say the seeds of my bankruptcy were sown when I moved more than 2000 miles away from home to go to college. The primary motivation for going to college out of state was that I knew I was gay and I wanted to do my own thing (on my parents' dime of course!) without them knowing about it. I also grew up in a cold winter climate and it was nice to move somewhere with warm weather! So, as you can see, I had some pretty unrealistic expectations / motivations / issues right from the start.

Within 6 months, I met an older guy who seemed to have answers to a lot of the spiritual aspects of life that I was curious about and we ended up moving in together, motivated largely by the fact that he'd lost his job and was living with a kinda trashy roommate. (Red flag right there, I know). Toward the end of my first year of college, my parents had found out I was gay and about a month later they discovered I was living with a guy who was ~ 20 years older than me and they flipped out (This was the late '80s and his voice was on my answering machine....DUH...I know). Long story short, they were still kinda freaked out that I was gay, and when they found out I was living with some guy 20 years older than me it put them over the edge. Drama ensued and they cut me off financially.

I got a job and went to school part time. He had just started his own business that had a lot of ups and downs that he didn't know how to deal with. I was freaked out because my income wasn't enough to support myself, let alone him and I was trying to get through school. After about 1.5 years he ended up getting in over his head with business and personal expenses he couldn't pay, we ended up putting his business in my name. I know. Horrible idea. I went along with his "It'll be different this time" line of thinking out of fear, I think. I didn't feel like I had any better options at the time. That may not have been true, but as the saying goes, perception is reality. By the time I was 21 years old, about three years after we met, we both ended up declaring bankruptcy, primarily because of overwhelming business and personal expenses we just couldn't pay.

In general, there was a lot of tension because I was more of a saver and he was a spender. He would do stuff like go out to eat even though we didn't know where the rent money was going to come from. This would infuriate me, but for him this "coming from behind" way of operating was actually his comfort zone. We had VERY different ideas about what financial stability looked like. He grew up in a large family and basically had a hand to mouth existence. I grew up comfortably middle class with parents who are like most of the FMF profiles here. Lived below their means, paid cash for modest cars, paid the house off early. Saved inside and outside their 401ks (when they became more widely available in the early 1980s). I really had NO CLUE that most people didn't live the way my parents did. My mom used to say back in the 1980s "In any given neighborhood half the people can afford to live there and the other half can't". Unfortunately, as the 2008 financial crisis proved, she was right. (I think by 2008, it was more like 2/3 of the people couldn't afford their lifestyles, as Jean Chatzky's research for her 2008 book The Difference showed that 69% of Americans were either going further in debt or were living payday to payday). So my ex and I had completely different internal financial scripts that we went by....but our different scripts were only one small part of the problem.

I came to realize in the next 20 years the reason for that. He had been sexually abused as a child by several older brothers (who, in turn, had also been molested....this is what the cycle of abuse often looks like). He had mentioned this to me when we were together that he had some memories of this, but I had absolutely no idea of any of the implications. My ex recently went to a very good psychologist and recovered a lot more memories. It turns out the abuse was much more extensive than he initially remembered and that there was both physical and sexual abuse. It turns out that people who experience this kind of childhood trauma often repress their memories as a defense mechanism. 

One of the big traits my ex had as a result of the childhood abuse was he had a hard time with ANY kind of stability...As soon as things start going on a comfortable "cruising" altitude, someone or something would come along to crash the plane. This type of thing is very common with those who were sexually abused as children. Stability is actually very uncomfortable for them. They can't handle it, so they sabotage themselves so that they're always coming from behind. Always putting in lots of effort and making great strides, but never getting anywhere.

People who suffer childhood sexual abuse often attract abusive people in their lives (Employers, "friends", and acquaintances take advantage of them financially and otherwise). They tend to have a HUGE issue with feeling they don't deserve anything. Sometimes they try to cover this up by overcompensating and being super positive on the surface...but underneath it all, they feel they are bad people and are unworthy of anything. They put themselves in positions to be taken advantage of over and over again. My ex had started his own business as the result of being in an abusive employment situation. (Yet another red flag that I didn't see at the time).

I lived through this for 6 years without really understanding the abuse aspect of it at all even though the signs were there. For example, when we first met, he told me he had 2 ex wives who had been killed by ex boyfriends...2 more red flags to add to the collection. (Of course, the whole gay and being married thing is a whole other weird dynamic...but suffice it to say it's still much more common than many folks want to admit). Prior to meeting me, he had also been in a few abusive relationships with other men. It wasn't until recently that I fully understood why my ex got into those self destructive financial and relationship dynamics. He would be fine...and then BOOM, he'd be depressed for no reason and his business would start falling apart. I would get angry and upset, which would only add fuel to the fire. It was all very bewildering and frustrating.

Now, here was my end of it:

• I was a little too comfortable and had unrealistic expectations of life. In my ex's terms, I was a "rich kid". He was mostly right on that point.
• I had a fear of driving so I did not drive, which severely limited the kinds of jobs I could work.
• I was not a very confident person (still am not particularly, but much better than I used to be).
• I think being gay definitely put me at a disadvantage in many ways. Primarily because I didn't have a good relationship with my dad. Therefore, I didn't get the career coaching and guidance that I would've if we'd had a better relationship.
• There was also just a lot of fear going on. I think I had a general fear of men from being bullied at school (I'm stereotypically gay)...so I shied away from male dominated professions that might pay more. That also went back to my dad. My dad was in business, and I (subconsciously) chose a liberal arts type major partly because I didn't want to be anything like my dad.
• I also didn't get good relationship guidance because I lived far away from my parents and everything was colored by the gay issue on both sides. My parents didn't really like my ex. They knew something was odd about him, although they didn't get to the core of what was wrong (which was the childhood sexual abuse). My ex did fulfill a parental role for me in many ways. He was a good mentor in many ways, but because he was emotionally damaged himself, there were many things he just could not help with. 
• I am an introvert, so I wasn't good at reaching out to other people in terms of friends or job networking. I was really socially clueless for a long time. I gradually got better...but I really didn't get completely clued in until I was in my mid 30s. I think my ex tried to help me with this...but I wasn't a good listener and I think maybe his approach wasn't the best and was tainted by his own insecurities. I think because he often got the short end of the stick in business and personal relationships, I didn't take his advice seriously.

The results so far:

• I patched things up with my parents. I learned how to drive. I graduated from college. I wasted a semester on grad school before I realized I was just going because I didn't know what to do with my life. I finally found a direction and got employment that paid me enough to survive. When I was 24, we broke up, and I moved out, but stayed friends with my ex.
• I don't make a lot of money, but I'm in pretty good shape financially (see my 4/26/11 profile). My income took a hit due to across the board pay cuts in my public sector job, but my net worth has grown significantly since my original post and I've managed to save the same amount toward retirement.
• After we broke up, my ex subsequently got in a few more abusive relationships with other guys. One guy in particular, was really bad news. However, after the really bad guy, he did have a very stable period with one nice guy for 5 years before they broke up a few years ago.
• My ex, is now in his early 60s, is in poor health (diabetes and kidney disease) and is just getting by financially with minimal or no savings. We've remained friends but he lives in a different state. I worry about him even though he tells me not to. I don't think I could let him end up on the street if a medical or other emergency were to occur. At this point, I think it's too late for him to dramatically improve his financial situation, although some marginal improvement might be possible. If anyone has any advice about what to do with someone in this situation, I'm all ears!!!! Yes, I know I'm not responsible, but if it comes to that, it's tough to let people you care about end up on the street or at the whims of government bureaucracies.

Over the years, especially the last year or two, I have learned A LOT about childhood trauma and how it affects people's financial and relationship decisions. The short version of this is that financial success absolutely requires a certain level of emotional intelligence that most people don't have. Sometimes I think blogs like this really miss that point. We need to really understand that the history of humanity is the history of trauma and abuse. Think of all the wars going on throughout the world in the last 100 years.

I am absolutely convinced that until we can learn to heal people and ourselves from the emotional traumas that are much more common than is currently recognized, we can't help them financially. The hard part is that I'm not sure modern psychology/psychiatry really knows how to heal people--at least not fully. We must understand that the human race has progressed much faster technologically than it has emotionally. Fortunately, most of us don't have severe abuse in our childhoods, so the emotional blocks (and we all have them in varying degrees) can be more easily overcome. But it's absolutely essential that people take the time to understand the underlying motivations for their behavior. Those motivations are not always evident on the surface level, as I think my piece has clearly demonstrated.

Reader Profile: SB

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 SB. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am 33 year-old married woman.  My husband is also 33.  We live in the San Francisco area; we don’t have any kids yet but are expecting our first early this fall (very exciting!!).  We also have a dog.  We are fortunate to both work in high-demand, well-compensated sectors; I work as a business consultant for a well-known consulting firm and my husband is the director of a local non-profit.  Collectively we earn approximately $290,000 in base salary and $20,000-$25,000 in bonus annually.  This is a HUGE jump up from our salaries of just a few years ago.  We both plan to continue working full-time, but in the long-term I am looking to transition into a career that is not quite as intense.  While financial security is very important, I’ve been fortunate to get to a point at which having more work / life balance is a bigger priority.  I easily work 60-80+ hours a week and don’t want to look back on my life (particularly with kids) thinking I spent too much time working.

My husband and I both attended private liberal arts colleges; I attended a top full-time MBA program and he did not attend graduate school.  We were very fortunate to have a mix of parent support, scholarships, and loans for undergrad and graduated with $26,000 in loans (those are now paid off).  I graduated business school nearly 3 years ago with $165,000 in loans (ouch!) although that is now fortunately significantly lower.

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

Income

In addition to our salary, we also have a rental condo from when we lived in DC.  We could sell it but it’s in an up and coming area that we believe will continue to appreciate in the coming years, and we have no trouble renting it for significantly above our mortgage.  We rent it for $2,700 and pay $1,500 in mortgage + insurance + condo fees.  We don’t have any plans to sell anytime soon.

Expenses

Our monthly expenses, including savings and debt reduction, are as following:

• $2,750 a month for our one bedroom in San Francisco (sigh….)
• $1,500 a month in mortgage, insurance, and condo fees for our condo in Washington, DC
• Nearly $3,000 a month in pre-tax retirement contributions for both of us (the max); my husband receives a match of 4.5% his income and I receive a match of 1.5% my income
• $1,000 a month into an emergency fund
• $1,000-$1,500 a month into a house savings fund, occasionally more (more on that later)
• $2,500+ a month into my student loans.  I honestly should probably put more into savings, but it’s been hard for me not to put as much as I could into my loans ever since I graduated business school with $165K in debt.  Sometimes I’ve put as much as $4,000 a month into my loans, and I’ve put 100% of my annual bonuses into my loans.  I’m proud of having paid down $110,000 in loans over the past 30 months, as I have many classmates who pay the monthly minimum
• $250 a month into a condo fund, so that we have savings earmarked for anything that comes up
• $250 a month into a car savings fund.  While we don’t have cars right now, we are planning to get one soon before the baby arrives
• $150-$300 a month for our dog; this includes food, occasional pet bills, and walking when we have to travel for work
• $300 a month for health & dental
• $200-$300 in charitable contributions and gifts
• $100-$250 a month in transportation.  Most of this is for two bus passes, but we also rent a car approximately one weekend per month.  We do not have cars as we can take advantage of public transportation, but we do occasionally rent a car to go on errands, get groceries, etc., and visit family who live outside the city
• $200-$400 per month on clothing.  I could try to reduce this, but I work on-site with clients every day and to some extent consider this spending to be an ongoing investment in my career
• $10 a month for Netflix (we don’t have cable)
• $40 for internet
• $25 in utilities
• $50 a month into a 529 college fund for our nephew
• $80 a month on laundry and dry cleaning
• Our biggest issue is the broad overall catch-all of miscellaneous, including food.  My husband and I both end up traveling a fair amount for work, and when we are home we both work long hours.  As a result we put a high priority on convenience / time, and too frequently we eat out or pick up dinner.  We probably spend at least $750 each month on food, oftentimes much more, which I recognize is crazy and could be reduced substantially
• We are fortunate in that we do not have to pay for cell phone plans (our employers pay for them)
• We are also really lucky in that travel does not generally represent a big expense for us.  We travel so much for work that we have frequent flyer miles and hotel points such that when we go on vacation our main expenses are generally food

Net Worth

Assets

• Condo ($410,000)
• Retirement Accounts ($290,000) (all pre-tax) (all in index funds)
• Savings ($55,000)

Liabilities

• Mortgage ($240,000, 4.25%)
• Student Loans ($55,000, 4.5%) (note that some of the other loans I’ve since paid off were in the 6-6.75% range)
• We use credit cards, but pay the balance in full each month and don’t carry consumer debt

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

Our major issues are to plan for the baby and save up enough for a down payment on a house in the bay area.  Child care costs will be the most significant, at least $2K a month.  I am fortunate to have a really generous paid leave and so we won’t have to begin child care until March next year … but still, we need to start planning for it.  Then there is everything else that comes along…medical bills, baby “stuff,” etc.  We are not really big “stuff” people, but I know it’s easy for that to change when a baby comes along.  We want to open up a 529 plan and will likely contribute $500 a month.  We also will purchase life insurance, I expect around $1 million each, and create wills.
 
The other issue is saving up enough for a down payment on a house in the bay area.  I know choosing to live here may not be a popular decision in this community, but we have family and large social networks of friends and colleagues here, and we both really love just about everything in the bay area – the weather, the outdoor activities, the diversity, the incredible food and cultural options, etc. – and want to plant our roots here.  We recognize the significant costs that come with that.  I believe we can afford to live here long term, but a big factor in that will be getting a mortgage at a low interest rate, and so I want to take advantage of those low interest rates within the next 12-18 months.  The only issue is the down payment.  We’d like to put at least 10% down, which means at least $90K including closing costs.  This is where I sometimes wonder if I should have been saving money more aggressively vs. paying down my student loans.  What do you all think?  With real estate prices rising here (we are looking at a few communities and many houses are going for 10-20% above asking price, w/ cash offers) I’m starting to get worried.  I also really want to take advantage of the current low interest rates.

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

Longer-term I’d like to transition into work that affords me more work / life balance.  I am fortunate in that my experience as a business consultant would make it easy for me to transition into a marketing, strategy, or business development role working for a client.  This is a common path for ex-consultants and I have many former colleagues who report that they are happier, still as challenged professionally, and have much more time for family / life after they’ve transitioned into a corporate role.  Making this transition does likely mean a reduction in my long-term earning potential, as consulting partners can easily make 5x or more my current salary, but at a certain income level, quality of life is just so much more important, and I would have a pretty grueling 5-7 years ahead of me, including pretty intense travel, to get to partner (plus a continued strenuous schedule upon becoming partner).  I see the lifestyle of the partners I work with and I just don’t want to raise kids that way.
 
We don’t really see ourselves retiring early, but I could imagine that one or both of us work part-time at different stages in the future.

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

For those in this community who are earlier in their careers, I would say don’t be afraid to take on debt when it is a thoughtful long-term investment in your career.  Be thoughtful about it, of course!  But if it makes sense, don’t let the short-term debt scare you off from something that will greatly increase your long-term earning potential.  My income is 2x more than it was prior to business school, and the job I have today – with raises of 10-15% a year, and really good job / career security – is one that requires an MBA from a top school.  It was a significant investment for me, of two full years of my time and that monster debt, but one that changed the trajectory of my career for the next 30+ years.  Even with all the debt payments I’m making today, I still have more financial “wiggle room” than I did prior to business school.
 
My other observation is that life is a journey, and that setting aside money for fun and dreams along the way is important.  Most Americans don’t save nearly enough for retirement, and so they don’t need to hear that message, but I think it’s possible to go too far in the other direction too – beating oneself up for the morning latte, or the vacation, or whatever it is.  I think it’s important to know what you need for retirement and for short-term savings, and to make sure you are saving enough to get there.  Once you are, great!  Then don’t beat yourself up if you do end up spending what’s left over.  Every budget should have buckets for saving / debt reduction, needs, AND wants – even if that wants bucket is pretty small.
 
I’ve learned a lot from this community and look forward to hearing feedback from the readers.  Should I put more money into savings rather than focusing so much attention on my student loans?  Am I misguided in thinking we need to save a down payment within the next 12-18 months?  What would you do differently if you were me?

Reader Profile: CR

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

Please tell us a bit about yourself.

My significant other and I are both in our mid-twenties with jobs close to home which have good opportunity for career growth. We purchased our first home in Midwest earlier this year. At this point in time we decided to combine our finances. Our plan is to get married in the next year to year and a half, we have not yet decided when. We have no kids at this time but we do have 2 dogs.

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

Currently we have several sources of incomes, the primary being from our full time jobs. My weekly take-home after taxes and a 10% contribution to my company 401k is 1000/wk. Year-end I typically have received a bonus around $10,000. Additionally I have part time job with a take home of around $350 bi-weekly and I do some bookkeeping for a few small companies on the side which generates about $300-400 per month. My significant other takes home roughly $1200 bi-weekly after a 15% contribution to her 401k. She also receives $5000 in bonuses annually. On an average month our income is about $8,000 after taxes and 401k contributions excluding bonuses.

Expenses per month are:

• Mortgage (Includes prop taxes which are very high in our area) 2010
• Association Fees 90
• Car Insurance 150
• Car Loan 395
• Student Loans 105
• Other Debt 1000 (Further explanation in later section)
• Life Insurance 20 (250k on me, she has 100k through work)
• Food 400 (Includes some eating out)
• Gas 300
• Misc 500 (Higher do cost involved with new home purchase)
• Cable/Internet 105
• Gas 75
• Electric 60
• Water 50
• Cell 145
• Pets 100 (Various Expenses)
• Car misc. expenses 100 (Oil Changes, general maintenance)

Total monthly is about $5,600. This leaves a surplus of approximately $2,400 per month with our yearly cash surplus being roughly $29,000.

 Assets

• Cash 15k
• 401k ~40k
• Home ~300k
• My Car – Few years old, low mileage, paid off
• Car Loan – Also newer, low mileage, car loan

Total Assets: 355k (Excludes value of cars as they are depreciating assets)

Debt

• 259k Mortgage
• 17k Car Loan (Financed with no credit history, high interest, which is why the loan value is still high, recently refinanced when we combined our finances – now 3.25% Interest)
• 5.4k Student Loans (6.5% Interest)
• 13.5k Family Loan (0% interest for a year, minimum payment of 1k per month)

Total Debt: 295k

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

Our current focus is paying down the family loan, while we realize the loan is interest free we would have much greater peace of mind knowing that it was paid off. We typically try to throw as much extra cash as we can each month. Last month we were able to pay $2,500 off. Our goal is to have this paid off by the end of August or October at the latest. At that point in time I plan to quit my second job as I would like to pursue my Masters degree this upcoming fall. This will reduce our income but not significantly and I believe we will still be able to pay extra towards remaining debt. We would then focus on paying down the student loans because they are a higher rate than the car loan and the balance is much smaller making it easier to pay off. I would like to take our bonus income and use it towards investment. I have always been interested in real estate investment and believe I would like to purchase my first property in the next 12-18 months. The bonuses could also be used to pay off all remaining debt outside of the mortgage.

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

Our current plans are to advance our careers as much as possible. I have excellent career growth opportunity at my current place of employment and she continues to move up in her company as well. In the next 4-5 years or so once I have completed my Master’s and we have established our finances we intend to have 2 children. We would like the option to retire from our primary jobs after our kids have graduated high school.  I would like to work part time as a financial advisor later in my career or post retirement because I have always had an interest in helping others with their finances and investments. Our retirement plans will be heavily contingent on our career growth and whether she continues to work full time once the children are born.

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

Set goals, pay yourself first and invest for your future. I have always been very aggressive when paying down any debt and save as much as possible and my significant other is learning to do the same.

Reader Profile: TW

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 TW. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.
 
I'm a 24 year old single female living in the Boston/Cambridge area. After graduating grad school, I moved up here to be with my boyfriend (who is currently in grad school). I luckily found a job and have been working about 8 months. My boyfriend and I rent a house with 4 others, totalling six people (one shower :) ). Although I have a car, I try to ride my bike to work as much as possible (probably bike about 75% of the time.)

My job is great - it's very flexible, within biking distance, not too stressful, and they have a complimentary gym (which i use about 5 times a week).

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

My annual income is $46,000. I put 25% of this pre-tax in my 401k and receive an employer-match up to 4%. I also have investment income which has been historically $18,000 to $20,000 per year. And I am very lucky to have annual "gifts" from my parents totalling $28,000 per year ($14,000 per parent). It is unknown (meaning I haven't asked) how long these gifts will continue, but I have reason to believe they will continue at least for the next four to five years.

Expenses (per month):

• Rent: $500-600 (may be losing a roommate in the future)
• Utilities: $75
• Groceries:$220
• Gas: $60-$80
• Rock climbing membership/gear (for year): $300
• Eating out: $15-$30
• FSA/health: $55/month ($650 for the year)
• Insurance for auto, renters, other: $145

Assets:

• Checking: $13,000
• 401k: $8,000
• Roth IRA: $10,500
• Investment account (managed by Dad): $500,000
• Car: $5,000

No debt.

What are the current financial issues you're facing (saving, paying off debt, etc.)?
 
I have been very fortunate with my parents giving me annual gifts and a substantial investment account. I also try to be pretty frugal (not eating out, biking, i don't really buy clothes, nor do I spend much money on entertainment other than rock climbing). However, I would like to know how I could live more frugally? What should my future financial goals be?  Does it make sense to eventually use some of my investment account for a down-payment on a house?
 
What are your plans for the future (retire early, build your career, etc.)?
 
I would like to continue putting 25% in my 401k and saving for possibly a car and house. I am eventually (within the next year) going to open a savings account. As for a wedding, I am hoping to one day get hitched and only pay about $10,000 to $15,000 for that. Another goal (other than saving for house, car, and wedding) is to put my own money (not my parents) in other investment accounts. Lastly, the best thing I think I could possily do is to focus on my career and increase my income.

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

Saving is a prerequisite to investing. To save more be happy with less.

Reader Profile: EA

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 EA. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am 31 year-old single woman living in a Western U.S. city - large metropolitan area with a comparatively low cost of living (particularly housing).  I just bought my first home last year (townhome with a small patio – perfect size for me) and I also took a new job (home purchase and job move occurred almost simultaneously - about 9 months ago).  I work for a large real estate investment trust (REIT) and work on the transactional/financial side. 

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

I work full-time.  I started my first job exactly one week after I graduated from college (2003) and have worked in the same field for my whole career (with the exception of one year spent in DC working for a US Senator).  I was with the same company for my entire career until my move 9 months ago (former company let me do the 1 year stint in DC and come back). I worked hard and got several promotions and opportunities.  The main reason I took the new job was that it was a pretty substantial title and salary increase (about 25% increase – all-in (salary + bonus)).

Income

• My income: $130K gross annually, plus a 40% annual bonus.  So, all-in – my 2013 income will be $182K.  When I get my bonus, I put it all into savings.
• My monthly take home (just salary) is about $6,600 (after 401K contribution, healthcare and taxes)

Expenses

• Mortgage: $1200 (this includes an extra $100 per month towards principal)
• HOA: $247
• Food/Wine: $500 (I am a foodie and entertain a lot – I recognize this may be extravagant to some, but I enjoy this part of my life and feel like I have some room to spend here)
• House Cleaners: $160 (they come twice a month @ $80 per visit)
• Utilities: $200 (this is electricity, cable and internet)
• Going Out: $300 (same philosophy as my food budget).  I am out most week nights after work and at least one weekend night.  A big part of my job is relationship based and I am often out on weekdays with clients, etc.  This number would be much higher, but most of my really expensive/fun week day stuff goes on the company expense account.
• Clothing/Make-up/Skincare: $250
• Target/Household Stuff: $100
• Services: $200 (Hair, blowouts, nails, eyebrows)
• Car insurance, gas and car wash: $200 (I own my car – 2008AudiA4 – only 35K miles – I will keep for a least a couple more years)
• Charity/Donations: $250
• Savings: I have an auto deduct to this account for $2,500 monthly.  I generally have extra on top of that (although sometimes Clothing is higher).  Whenever my checking account gets too high (about $7K or higher), I transfer a lump sum into savings.  The account is a Capital 360 Account (formerly ING) and I am happy with it.

Assets:

• $230,000 (Townhome value)
• $72,000 (401K – rolled my old one into current.  Company matches up to 3% - I contribute 10% for now – I will make sure it is fully funded)
• $13,115 Fidelity Roth IRA (I can no longer contribute based on current income, so it’s just invested and growing)
• $30,000 (Current Savings balance – I use this as my “everything” savings.  Travel and any other extras come out of this.  I also consider it my Emergency Fund.   The balance is normally about $50K or higher.  I used about $45K about 10 months ago for down payment and renovation on my house.  I expect it to increase again going forward.  The last couple years I have had large expenses (house down payment, house renovation, paid off my car) and I don’t anticipate any other large investments for a couple years.)
• $10,500 Fidelity Investment Account (I have this split between various dividend stocks)

Debt:

• Townhome Mortgage ($189,000)
• No other debt. 

I have never had credit card debit.  I went to a very good public university in California (I grew up there, so I was a resident).  My parents paid for my education and I am SO thankful they did it.  It was a gift I can’t place a value on.  That being said, it was “public university or the highway” in my family (my parents started telling us this in about 7th grade, so we were very clear on their expectations).  The parents paid tuition and housing.  They expected us to get a part-time job to pay for all other living expenses, and they also required that we graduate in 4 years and maintain a 3.5 GPA or higher.  Looking at the above couple sentences, it makes my parents seem really strict, but I never felt that way.  They were always super supportive.  They just acted like we were worthy of high expectations and, thus, always held us to them.

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

I’m happy with my home and my savings plan.  I do wonder if I could be doing more to avoid taxes.  I really get screwed because I make a high income and am single.  I have a mortgage now and can write-off interest payments, but aside from that and fully funding my 401K, I don’t see much else I can do.  Any input here would be helpful.

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

I don’t think I will retire early.  I definitely would like to get married and maybe have 1 or 2 kids, but I would probably still work.  Obviously, that could change – I have no idea what it would be like to have kids at this point, but, that’s the plan for now.  I am good at my job and I generally like it, so I can’t imagine being at home full-time.  My current position is very demanding and, at some point, I would like to make a move to something that allows for a little more free time.  I may take a bit of a pay cut if I do that, but it wouldn’t be substantial.  For the time being, I have a lot of fun and I can’t see doing anything different.  I have always been super focused on building my career and I feel like I am finally reaping the benefits of all my hard work (I get to go to the dinners at high-end restaurants, attend the ski trips to Aspen and go to the NFL games now, instead of staying behind to build financial models!).

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

I am so thankful that I worked hard and long hours when I was young.  It isn’t for everyone, but it’s how I got to where I am today.  I was also very lucky to graduate in 2003 (still good economic times – many jobs available.  If I were a couple years younger, things would have been very different for me).  The biggest thing I learned about succeeding in the business world is this:  Be the most likable person in the room.  If you are marginally smart, that’s a plus.  People want to spend time with people they like: people who are fun to be around, have a good attitude and want to help get a job done.  I have used this to my advantage my whole career.  Also, they may say it’s a “man’s world”, but, for me, being one of the few women in my industry has ALWAYS felt like a positive.  No one ever forgets who I am – it’s pretty easy to remember the only girl in a meeting with 20 men – plus, I am not shy about speaking up and bringing my opinion to the table.  Even as a child, my Dad made sure I knew that my opinion counted (if it was well thought out) and I should share it. 

Also – I spent a year in DC working for a Senator as noted above.  It was a much lower income job, in a pretty expensive city, and I never felt like I was struggling financially.  It taught me that I could live on a lot less and be happy – a great perspective to have.  I got a great “education” working on Capitol Hill, and, while the salary wasn’t stellar, I did get paid as a staffer.  As far as “resume builders” go, the job on Capitol Hill has gotten me more street cred than any MBA could have.  And I didn’t go into debt for it.

I am sure many people may not agree with some of my spending habits, but, the fact is that I take home $6,600, which is a lot of money (at least to me).  Also, I benefit greatly from making a relatively high income and living in a place where housing is not very expensive.  I grew up in Southern California and also lived in DC, so I know what expensive housing can do to you financially.  I knew I wanted to have some lifestyle extras and I was willing to live in a cheaper housing market to allow for that (plus, I happen to love my home and my friends, so I got lucky there).

Reader Profile: CM

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

Please tell us a bit about yourself.

My wife and I are 31 years, have been married almost 2 years, and are expecting our first child July 1. I run a small sales office for a German IT manufacturer and my wife is a nurse. We currently rent a place in Charlotte, NC and still own a condo in Savannah, GA where we are from. In our first two years of marriage (and a year of being engaged) we had quite a few large expenses including the ring, honeymoon, wedding expenses, my sister's wedding in Australia (she got married 3 months after us... bad for the wallet!), vacation in California, two cars, and her best friends wedding in Hawaii this past Sept.

Needless to say, we spent ALOT of money over these past couple years (and had fun doing it) but knew after returning from Hawaii and finding out we were pregnant it would all be over for a long time. Now, after much time and frustration I feel that we are on the right path... just wish we were moving down it quicker!

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

My wife's income is stable and mine varies a good bit as a large part of my compensation is commission based.  The numbers used below represent good averages.  Depending on the final sales numbers at end of year I am eligible for a profit share and bonus structure which tops out at around $38K (best case scenario) and $10K (worst case scenario). My company does not offer a 401K at moment, but this should change shortly.

Our budget for April was as follows:

Income (monthly)

• Wife - $3400 (after health insurance and 401K contributions)
• Me - $6000 (after health insurance)
• Rent from Condo - $1054
• Total Income: $10,454

Expenses

• Rent - $1225
• Utilities - $250
• Mortgage - $872
• POA Fees - $294
• Wife Car - $350
• My Car - $350
• Phone - $90
• Car Insurance - $125
• Groceries - $500
• Gas - $280
• Restaurants - $400
• Baby Supplies - $250
• Clothing - $100
• Personal Care - $50
• Misc. - $200
• Total Expenses: $5,336

Surplus: $5,118

Assets

• Emergency Fund: $16,000
• Savings: $1,000
• Wife 401K: $30,000
• Condo: $115,000

Liabilities

• Wife Car: $350/ mo. lease (27 mo. remaining)
• My Car: $14,000 @ 1.49%
• Mortgage on condo: $138,000 at 4.25% (at least $23K underwater here)
• Credit Cards: $0
• No other debt

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

Over the past year we have paid off ALOT of debt (about $30K) which has been great. At the moment I am most focused on getting my car paid off and bringing the emergency fund to $22K.  Our monthly surplus is currently being divided equally between these two items. Once these two goals are accomplished (should be done by Sept. 1) I will then focus on how to get us out of her lease (yes, leasing cars is stupid, but doing that last year allowed us to pull $4K of equity out of her old car to pay off a credit card while lowering her monthly payment so I think it was right call at the time) and into something we can pay cash for.  All of this needs to be done by the time we have to start paying for daycare ($1000/ month... ouch!).  Once those items are completed, the focus will be creating a house fund.

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

The biggest priority is to get into a home. We recently considered trying to rent somewhere else (we need more space) for a year, but realized that due to a smoking hot rental market here in Charlotte we would be spending probably another $800/ mo to get an extra bedroom and a little more space which isn't worth it.  Since we are getting a very good deal on our place right now, we plan to stay put through the end of year allowing us to save as much as possible.

I plan to purchase a home we will want to be in for at least 20+ years (target will be 10% down for a home in the $400K range).  Biggest challenge we face is a time crunch. Alot has to happen to pay off the debt outlined above while putting $40K in the bank for a downpayment. The determining factor will be my bonus money at end of year.

Once settled in a house, I plan to pay down my mortgage for my unit in Savannah to get it around $110K (current balance is $138K). We are currently losing $120/ month while having it rented, but this is a vast improvement over the $480/ month I had been losing since I moved to Charlotte in 2009.  Since our income wasn't nearly as high then as it is now, losing this every month was a huge factor and definitely made saving difficult. Luckily, after about 30 attempts over the past 4 years (no exaggeration) I was able to refinance under Harp 2 last year, so my losses have been cut significantly.  The demand for my unit and the property has always been strong (never missed a month of rental income), so if I can get the mortgage down to around $110K and refinance again I should finally be able to cash flow the property (figure $250/ month) or sell it outright.

I also need to get my retirement savings in order since I basically have none.  My employer has said that will entertain a proposal to start a 401K w/ 3% match starting in middle of this year. Not quite sure what to do about this yet as my current focus is getting rid of debt.

My ultimate goal in building long-term wealth will be investing in real estate. I would eventually like to have a portfolio of rental properties consisting of apartments, duplexes, and trailer parks. I have learned alot about what to do/ not to do with my unit in Savannah and continue to spend alot of time learning about real estate from books and from those that actually do it successfully. Still much to learn!

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

I'm not sure if I am in a position to give advice yet as I know that we are WAY behind where we should be at our age in regards to net worth, but I think the most important advice I could offer is to be constantly committed to learning and improving. Unfortunately, I didn't really figure this out until age 29 or so at which point all the spending starting to become really painful. Thanks to resources like this blog and people like Dave Ramsey, I now spend time every day trying to educate myself further. There are incredible resources out there if you take the time to find them.

It is also paramount to disregard to status quo. Just because certain things seem completely normal to alot of people (like big car payments) doesn't mean they are smart. Educate yourself, commit yourself to a set of beliefs and practices, and stick with them. Disregard what others have to say about it.

Patience is also extremely important and something I struggle with constantly. In my work and elsewhere I like seeing instant results. When it comes to finance, I know this is not an ideal combination as good things take time.

Track everything. I use mint.com and I make budgets in excel every month after my wife and I sit down and discuss what expenses we have and if there are any items we need to plan for in coming months. Being open and honest in your communication with your significant other makes life much easier. There should never be any surprises regarding big purchases.

I feel that the most practical and useful tips regarding financial common sense can be summarized by several of Dave Ramsey's goto comments:

1. Debt is dumb
2. Don't take advice from poor people

If people can grasp these concepts and apply them to their lives effectively every day, they will/should live happy and fulfilling lives.

Last, I would love some input on my current plan.  Here are some specific questions I have:

• Am I doing the right thing by splitting my monthly surplus between my car and the emergency fund?  I am only doing both at the same time since we have baby on the way and I am not comfortable with not having sufficient cash reserves while welcoming a new dependent into the world.
• What should I do about retirement planning?  My employer has said they are open to doing a 401K with a 3% match (I will be in charge of setting everything up) starting around June but I'm not sure if I should be focused on this until I get rid of my car debt. Is a 401K or IRA a better choice?
• If anyone has any suggestions on possible options on my condo, I am all ears. My property is in a 340 unit complex and there have been ALOT of foreclosures and short sales, some as low as $80k. Do I just continue to tough it out and pay it down over time until I can refinance and cash flow positive?
• Does anyone know next months winning lottery numbers they would like to share? :)

Reader Profile: MR

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

Please tell us a bit about yourself.

My wife and I are both around 30 years old and live in a mid-sized low cost of living city in the midwest (median household income in this city is ~$41k, typical home price for 3-4 bedroom is $140-$200k). We are expecting our first child later this year. My wife is a veterinarian and works for a good-sized practice with 5 other doctors. I have a background in computer software (BS degree in Computer Science), and now manage a development team for a Fortune 500 company. We live in a house that we built 3 years ago. We love to travel and in the past couple years have been to several places around the world.

I have read FMF for years, and always found the reader profiles fascinating, so I decided I should contribute. I've learned so much from seeing how others have handled their financial situations.

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

My wife and I both work full time at the moment, although she already has a slightly unusual schedule (Tues-Friday, with some Saturday mornings) that will alter further after the arrival of our child (same days, but she plans to drop to about 75% time and leave around 3 or 4pm every day). We have been extremely fortunate to find well-paying jobs and to substantially increase our income -- I began working after graduating from college in 2007, and started with a fairly typical salary for my field but was able to increase my income by 150% over the course of 5 years. My wife's income jumps have been less dramatic than some of mine, but steady and significant. All told, we have a base income over $210k/year with another ~$20k or so of annual bonuses distributed via cash or directly into 401(k) accounts.

I manage all finances in our house. I don't keep a really strict budget, because we have wild fluctuations depending on what our priorities are -- some months we'll buy something big we've been holding out for (like a room full of furniture), some months I'll just throw extra money at investment accounts or debts. However, I'll outline the things that are relatively consistent:

Monthly Expenses

• Mortgage: ~$2100/mo (20 year fixed @ 3.375%) + $200-$400 extra principle every month
• Utilities (power, water, sewer, natural gas): $300
• Communication (phones, cable, internet): $220
• Groceries: $300
• Eating out/other entertainment: $150-$250
• Gas: $500 (I drive 46 miles each day for work, my wife drives 66 miles each day)
• Car insurance: $80
• Charitable contributions: $400
• Medical insurance premiums: ~$300
• Misc (lawn care, web hosting, gym, etc): $200
• Home improvement projects/hobbies: $300 (very much an average; high some months, low others)

Monthly Savings

• Personal 401(k) contributions (total for both my wife and I): ~$2100/mo. This is basically as much as we can legally put in. (NOTE: I am limited to contributing around $8500/year, not the federal maximum of $17,500/year; because I am considered a Highly Compensated Employee and apparently the rest of the company's employees save too little, my contribution rate gets docked. I just got hit with this recently; I'm not sure I fully understand it yet but you can read more about it here)
• Company match 401(k) contributions: ~$750
• Traditional IRA: $416/mo (so we can max at $5k/year)
• Self-directed investment account (mutual funds, stocks, bonds): $1500
• Savings account slush fund (emergency fund, trips, furniture, cars, etc): $750

Debts

• Mortgage: $285k (house appraised at $385k during refi last October)
• Student loans: ~$18k @ ~2.2% (mine; we managed to pay for most of my wife's schooling out of grandparent/parent college savings and then scraped the last couple years out of my starting salary once I entered the workforce)

Assets

• House $385k
• 401(k)s: ~$150k
• IRAs: $8k
• Non-retirement investment accounts: ~$40k
• Cash accounts (checking, savings, emergency fund): $28k
• Cars (two 2011 vehicles, both purchased new and paid off): ~$42k

We have several credit cards but always pay them off in full every month. I put everything possible on the cards to maximize rewards. We primarily use a cash back card that nets us roughly $600-$800 a year in rewards, plus another card that gets us a couple hundred a year toward Amazon purchases (which we certainly use -- I'm probably one of Amazon's best customers). Finally, we have a third card that we use when travelling internationally because it has no foreign transaction fees.

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

We recently got the one car we had financed paid off, and right about the same time my 401(k) contributions were forcibly cut -- two events that freed up a fair amount of cashflow. So I just recently started putting more into my self-directed investment accounts, and will probably siphon some of the additional extra cash into getting rid of my student loans. The relatively low interest rate on those hasn't set a fire under me to pay them off, because I've gotten a higher return on my investment activities, but it would be nice to have them off the books. I also want to direct more into charitable giving, and am trying to determine the best place to give.

Obviously with our first kid on the way, our finances could look quite different in a year -- although it looks like we're going to be fortunate to not have to pay typical childcare costs, as we have family members that are insisting they can watch the baby while my wife's at work. One very tactical financial issue we'll continue to face is the length of our commutes and the resulting gas bill -- moving isn't an option, as we go in opposite directions. We're already optimally placed. Our vehicles are near the top of their class in fuel efficiency. Spending that much on gas just really bugs me. It's like burning money. By the time we need to replace one of our current cars, I hope Teslas are more affordable :)

Short term significant financial expenses, aside from the baby, include a number of home improvement projects -- we've been in the house for 3 years and have probably averaged $7k-$8k/year in such projects, but have increased the value of the house by a rate of over $16000/year in the same time period, by making smart choices and by doing some of the work ourselves. We purposely built the house with these future projects in mind, anticipating we could increase the value this way over time.

My biggest goal is to be able to enjoy our lives now while still socking away quite a bit for retirement -- I think we're doing decently well there, especially considering I've only been in the workforce for 5 years and my wife for 3 (and for my first 2 years, we couldn't save a thing). I am continually afraid of having to worry about money rather than enjoying life when we reach our retirement years, so maxing out our retirement savings was one of the first things I did as soon as I felt we could afford it. In the last 18 months, I've had to face the (admittedly good) problem of what to do once you've exhausted the usual tax shelters for retirement -- something that's complicated by our high income. As I noted in the outline above, I can't put as much as I'd like into my 401(k), and my IRA contributions aren't deductible because of our income level. I think I'm at the point where I may need to hire a financial advisor to make sure I'm making the most of the options that are out there.

Additionally, I face a constant internal battle because I tend to have expensive tastes and hobbies -- do I indulge a bit to reward myself for success, or do I try to hold back and save even more? I do try to defer gratification as long as possible, but it's difficult. My wife helps me rein some of this in because she's extremely frugal by nature.

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

I would love to retire early and do something low stress where I don't care how much I get paid (who wouldn't, right?). As for my current career, I'm sure I'll move jobs again at some point -- I'm in my third since leaving college 5.5 years ago. However, I would like to find something a bit longer term and slower paced by the time I'm in my 40s. Whether that's really "retiring" and doing something completely different, or just a significant adjustment in workload and responsibility, I'm not sure yet. We'll see. I expect I'll step out of the workforce gradually.

My wife, being a veterinarian, has wanted to be a vet her whole life and will probably continue to be a vet for as long as she can. We may have an opportunity to buy the practice she works at -- another thing that could change our finances significantly. That's going to be a major event, and purchasing a business is something I've been trying to educate myself about. What happens on this front will likely dictate a great deal of our financial future.

Our two huge "fun" goals for later in life are to get few acres of land and build a custom home (designing homes is a hobby of mine and I've been working on our dream home in my head for years), and to travel -- a lot. We have an enormous list of places we want to go. We'll never stop traveling in the meantime, but the list is so long I know we'll never get to it while we're working all the time (and raising kids). The non-retirement investment accounts are intended to fund these goals.

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

I sometimes don't feel that I'm very qualified to offer financial advice, because I only have a few years of experience and because we've been fortunate to have such a high income relative to our expenses. I feel in some ways I've just been lucky. However, there are a few things that I can call out:

• Try to maximize your salary as early in your career as possible. This may be a "duh" moment, but it's worth saying -- your future salary level is determined by your current salary level, and a % increase on a high number is greater than a % increase on a low number. I supposed paired with this is to know what you're worth -- I am able to push for a higher salary when the time comes because I've demonstrated my capabilities and know that I'm valuable.
• FMF says this all the time, but...live in a low cost of living area if you can. Our financial position wouldn't be as strong if we were living on the coasts. And we have plenty of money to travel wherever we want, partly thanks to living where we do.
• Spend less than you earn! (shocker, right?) My corollary to this is: have a crash plan. We could live on just one income if we had to, without losing the house. Our savings rates would drop dramatically until we paid off the mortgage, but it could be done. Never back yourself into a corner such that one life event could completely ruin your way of life. If one of us suddenly lost our jobs (extremely unlikely given our high performance), I know exactly what would be cut out of our budget so we could keep going without dipping into savings.
• Finally, consider marrying someone who will challenge you! OK, maybe you can't plan this one quite as much, but it has helped me. My wife and I are very different, in many ways. Financially, she's actually the frugal one. No one's ever accused me of being cheap or frugal -- she, on the other hand, was excessively cheap (cheap in that way where you sometimes buy cheap things only to have to replace them because they were so bad), so we've found a great middle ground. She reins in some of my more indulgent ideas, and I help her realize we can enjoy life but still save.

Reader Profile: LS

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 LS. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I'm a recent college grad, age 23, living in a large US city and supporting myself for the first time. By "supporting myself" I mean that I live entirely off my own income, but I also was fortunate enough to receive a large sum of money which I don't touch (more about that below).

I actually work two jobs, one that is part-time and seasonal and one that is more steady. I enjoy the seasonal job very much but don't see much room for growth there; I do not enjoy the steady job and am planning to leave it in the next year or two. At this point I have no idea what career or field would be more rewarding for me.

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

My situation is unique because when I was 20 I unexpectedly inherited a large sum of money (over $100K) from a relative. My parents (who are very financially responsible) encouraged me to put it all in the hands of a financial advisor, so I did. After I graduated from college I used some of it to pay the bulk of my student loans; the rest is split between a Roth IRA and a non-tax-advantaged investment account. I eventually would like to move away from having the advisor, but since I have a large sum to potentially squander and not much investment knowledge, it seems to make sense for now.

As for the nitty gritty: I net about $2400 every month from the steady job; the seasonal work varies quite a bit (as one would expect from seasonal work), so I've had months where I've made another thousand+ on top of that, and months where I've made nothing additional.

I still live like a college student, and I keep my expenses below $2000/mo, excluding repayments on my student loan and charitable donations. (That's pretty good for my area, which has a high cost of living - I spend almost $700 on rent and live with three other people.) I donate at least $200/mo to my nonprofits of choice. At the end of the month I usually have about $200 to throw toward my student loan when living off only the steady income. I also am trying to put everything from the seasonal work toward my student loan, so I'm expecting to pay it off by the summer, at which point I'll start investing the money from the seasonal job.

If you're like me, you probably enjoy the reader profiles in part because you're a little nosy about how others are doing, so here's the full breakdown of my current net worth:

• $113K invested
• $23K in a savings account (my emergency fund is $11K; I'm saving the rest because I will probably owe a lot on my taxes - I received a lump sum from the inheritance last year and didn't pay state taxes at the time. Anything above $11k after tax time will be invested.)
• $4K student loan

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

Financially, I really am in a fortunate position. My student loan should be paid off soon, and I have about five months' expenses as an emergency fund. My biggest struggle is actually striking a balance between wanting to spend as little as possible, and making the most of this opportunity I've been given. I feel guilty when I take trips or buy a fancy meal, but on the other hand, there's more to life than money and I often feel that I should be more willing to spend on experiences. I try to save as much as I can, but I'm not sure there's a good reason for me to be saving so much. Any input the readers have would be helpful - and yes, I realize and appreciate how fortunate I am, and I know these are nice problems to have.

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

I really have no plans at this point. I haven't settled on a career, so I don't know how long I'll want to work. I plan to move around more before settling down, so I'm not worried about saving up for a house (although if and when I do buy a house, I'd probably liquidate some investments to make a big down payment). I've been considering grad school, so I'd probably pay as much tuition out of pocket as I could, but at this point I'm leaning away from grad school anyway.

I think that's probably part of why I feel unfocused - I'm not really saving for anything or spending for anything in particular.

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

I don't think I have any tips that FMF readers don't already know, but I will say that setting a good example for your kids is invaluable. My parents are extremely frugal and have saved a lot for retirement. But, when they do spend money on dinners out or trips, they are willing to spend to have an enjoyable experience. I am still trying to be as frugal as them, but I'm very grateful to have them as financial role models.

Reader Profile: BW

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

Please tell us a bit about yourself.

I'm a 26 year old male, married 2.5 years to a 26 year old female and we live in a Midwest city. I am a CPA and recently passed the CFP exam. I currently work for a RIA firm, while previously working in the tax department of a public accounting firm. My wife works in the office for a mid-sized corporation. We have no children yet, but plan to have one in 2014. We will probably have a total of 2 or 3 children, each about 1.5 to 2 years apart.

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

Gross income combined: $87,000 ($55,000 me, $32,000 wife)

2013 Expenses and Savings:

• Combined 401(k)'s including match (match 50% on 6% contribution): $650/month ($7,800/year)
• HSA: $250/month ($3,000/year)
• Mortgage (and escrow): $1,100/month (160k remaining on 30 year @ 3.625%)
• General Living Expenses: $2,000 / month (food, entertainment, cell phone, TV, electricity, gas, water, internet, gifts, etc.)
• Sinking Funds: $600 month (car maintenance, insurance, home maintenance, vacation - whatever is not spent in a given month is saved)
• Other Savings: $1,000/month (All $1,000 was going to purchase a car. Since that is finished, we are saving $5,000 for a new deck. After that, $500 for Roth IRA, $300 for new car fund, $200 to boost Sinking Funds more – Air Conditioner will need to be replaced sometime soon)

Net Worth:

• Emergency Fund: $16,000
• Sinking Funds: $15,000
• Checking: $2,000
• Wife IRA: $5,700 (Vanguard Total Stock Market)
• My 401(k): $2,000 (S&P 500 Index)
• Wife 401(k): $1,000 (S&P 500 Index)
• HSA: $1,000
• 2 Honda cars: $25,000 (Total for both)
• House: $185,000
• Mortgage: $(160,000)
• Total: $90,000

Insurance:

• Car: 100/300/100 liability and collision coverage on cars
• Disability: Both are covered at 60% through work
• Life: $1,000,000 30 year term for me and $300,000 30 year term for wife
• Health: Covered at 70% of cost at my work
• No umbrella as of yet, but something to think about in the future

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

Big Picture: We saved a bunch of cash to pay off some student loans, save cash for house down payment and purchase a new (used) vehicle. We are now starting to get retirement more under way and put things on auto pilot. We could (should?) be more disciplined with are budgeting. We could cut back on the general living expenses and save a few hundred dollars more a month pretty easily, I think. With having a child in the near future, we will need to decide if wife will keep working or not. I think at this point, the answer is yes, but the cost of child care will be a large factor and deciding if we will want to make the additional budgetary sacrifices (also depends on my wages over the next 12 to 18 months). Anyone experience this and have any general suggestions, besides increasing emergency fund and try living on my salary alone to see how the adjustment goes?

Short Term: After the deck is finished (by July 1st), I am thinking about putting more money towards the house to get out of PMI. We pay $45 per month to it and will need to get below $148,000 on mortgage to get there. I am more inclined to start the Roth IRA. Thoughts? Also, we might start allocating a portion of sinking funds (maybe emergency fund) to Wellesley Income Fund or Wellington (Vanguard). Does anyone have thoughts/suggestions on how they handle sinking fund accounts balances that they do not use every month? We are savings enough that it is just a big savings account that I allocate to different cells in excel every month. We have enough (generally speaking) to cover any expenses that come up every month out of the cash flow that is allocated to the sinking funds every month.

Medium Term: If we have extra money remaining in the budget after child is born, does anyone think it would be best to start on the mortgage, rather than saving for college? As of now, I am thinking about trying to save $200 to $250/month/child for college. I think at this low level, it is probably best to save in 529 plans (I receive state tax deduction) or taxable accounts. Anyone have experience with paying off house before kids go to college and using old house payment (and maybe even slowing or stopping retirement) to fund college? What about 529 plan vs. taxable accounts?

Long Term: In the next 7 years or so, we will have to decide if we want to send children to private, catholic school. Cost for K-8 is about $4,500 per child, per year and increasing. High School is $12,000 per child, per year. We live in a school district with great schools, so we always have that to fall back on. The cost/benefit in my mind does not work out, but wife is really pushing for it. Thoughts?

Any other thoughts/ideas/suggestions for us?

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

• I want to build the career more to be able to afford wife staying at home to raise children. I think this is possible, but it is hard to predict.
• Be mortgage free by age 50. This is in 24 years or so. This will largely depend on if we decide to ever upgrade house or not.
• Net Worth of $10 Million. This will depend on inflation numbers, market performance, etc. It is just a big, round number goal to shoot for.

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

• No debt, except for home debt. This must be paid off by retirement (but hopefully earlier) and only purchase home 2 to 3 times gross pay (no more than 25% take home pay).
• Save 15% of gross pay (including company match) for retirement, starting by at least mid/late 20's.
• 3 to 6 months’ worth of emergency savings.
• Once you have house at (or under) 25% of take home pay and are saving 15% for retirement, you can live a little bit, but not too much. Try to always be anticipating what expenses are coming. If you do that, it really cuts back on having to use the emergency fund, because nearly all expenses can be thought about a head of time.
• Get on same page financially with your spouse.
• Invest in index funds. We are 100% US stocks now, but will be moving towards 50% US and 50% International. I am just fine with the risk, but at some point in our 30s we will start allocating more money towards bonds.

Reader Profile: JB

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

Please tell us a bit about yourself.

I’m a single male in his mid 30’s working in technology industry; in the Boston area. I have a bSci and recently earned a masters degree. Both are related to my current career.

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

Income is generated entirely from my career; which has been growing yearly since undergrad.  Currently I take home about $4800 net, per month. This is after all taxes, as well as maxing out the full $17,500 in my 401k and $3,250 in my HSA.

Expenses per month are:

• First Mortgage 800
• Second Mortgage 350
• Condo Taxes and Fees 450
• Car Insurance 80
• Food/Gas/Misc 600
• Cable/Internet 70
• Gas 40 (high end, variable)
• Electric 40 (high end, variable)
• Cell 30

Total monthly is about $2,460. Given my income, I have about a $2,350 per month cash surplus. I also get about a $1,000 tax return each year as well.

Yearly cash surplus 2340 * 12 + 1000 = ~29k
 
But I also have some once per year expenses as well:

• Homeowners insurance 300
• Car registrations, oil changes, AAA, repairs 1500
• IRA Contribution 6000

Net cash surplus ~21k
 
Assets

• Cash 46k
• 401k 200k
• IRA 65k

Debt

• 130k mortgage only (car, school, credit card has been paid off)

What are the current financial issues you're facing (saving, paying off debt, etc.)?
 
I owe about 130k on my mortgage valued at 140k. The second mortgage about 20k of debt or 350/m will be paid off in 2020 at the current plan.  The first loan runs to about 2034.
 
Should I pay off the second mortgage now?  Half of the 46k is earning 3% in a CD, but the other half is earning less than 1%.  The funds are actually planned for my next car in 2-3 years.  Im very risk adverse and prefer not to take on additional debt.
 
What to do with the yearly surplus?  Given an adequate emergency fund and funds for a new car should my surplus go into the stock market?  Long term I should come out ahead, but what if? I want to bank up these funds for the timing flexibility to act if something comes up (see plans).

What are your plans for the future (retire early, build your career, etc.)?
 
Retire early/change career. I would like to be in a position where I could retire or more likely switch careers at age 45 to 50 time frame, possibly do part time work.  My significant other she is currently working, but our finances are separate at this time. I believe starting a family should remain a net positive on the finances if she continues to work, no?

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

Make a wish list. Credit cards enable people to fulfill the instance gratification on items that only add a few days of value to their life.  If they added the item to a wish list something else would eventually take a higher priority.  You would be surprised returning the wish list to add something new, see the previous items on the list and say, “oh wow I’m glad I didn’t buy that”. Consumers would save thousands.

Reader Profile: KG

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 KG. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I and my husband are a young couple with a five-year-old boy, and a girl that is expected any day now! We rent and live with my grandmother, in a house that my parents own. They give us a fantastic deal on rent so that we can live nearby, save money, and keep my son in a good school district until we've saved enough to get a house of our own. In return, my husband does small repairs on the house, and we do general upkeep and maintenance on the house and appliances. We hope to repay their generosity by completing several renovation projects before we move out.

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

As of right now, I'm working full-time and working on my degree online. Don't let anyone tell you that delivering pizzas is demeaning! I have great fun doing it, and it keeps the lights on. My husband had been in school full-time until recently, when he realized that the vocation he was learning (photography) was not something he enjoyed enough to commit to as a career. He just this week was hired by a security firm, and will be starting officially next week. Our finances are as follows:

• My income: $1100 per month, including tips
• Rent: $400 (see? I told you we were getting a great deal!)
• Food: $300
• Bills: $40 (phone, life insurance)
• Fun/eating out: $100
• Car insurance: $100
• Savings: $160

Around the time my husband begins work, I will be going on leave to have our daughter and take care of her. His income will be roughly equivalent to mine, and the budget will stay the same but for $60, which will be going to gas once mine is no longer paid for by my company. We own our two cars- mine is a 2009, his a 1996 with 230+ miles on it. We have a Roth IRA with about $6k in it, I have a 401k through my employer with about $1.5k in it, and when my husband is eligible he will be starting a 401k with his company as well. I currently contribute 10% of my pre-tax income, and he will as well when he starts his new job.

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

We don't have any debt, and we have a $4k emergency fund as well as $2k in savings. Our current goal is to save enough to replace his car when it finally bites the dust. After allocating about $3500 to that, we plan to save for a down payment on a home of our own. When the baby is three months old, I'll be going back to work part-time, which should net about $600 a month, all of which will go straight into savings.

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

I'm attending school online for my intended career, which will be something along the lines of counseling people on their financial lives. (I'm thinking accountant, or financial planner. I'd love to do something like Dave Ramsey does, which is help people through financial difficulties in their lives and teach them about the numerous financial products available. Maybe I'll start a business?) We're setting March of 2014 as a tentative goal for buying a home- that particular time frame because, first, around then the only derogatory mark on my credit report will be dropping off, bumping my score up, and second, because that will give us about a year to throw all of the money we can spare into savings for a down payment. Foreclosures in a nearby area, adjacent to a great school, generally run between $50k and $60k for older homes. We're going to get as close to a 20% down payment as we can, to avoid PMI.

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

Watch what you spend your money on very carefully. We're a very frugal family, getting our shoes, clothes, toys, and etc. from nearby thrift stores. We don't buy expensive electronics, don't have cable, and get our entertainment from libraries and dollar theatres. I know our rental situation is very lucky compared to most people's, and we take full advantage of that to pump up our savings. I guess it comes down to this- so many things in life that cost money are not important, and saving money by not buying them is the best way to control your finances.

Reader Profile: KR

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 KR. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I'm a 31 year old single female living in the Midwest. For the past 4 years I’ve worked in the marketing department of a university, and spent 5 years before that at an interactive marketing agency. The job change gave me a 13% salary bump and significantly better benefits, plus a huge decrease in stress.

In April 2010 I purchased a townhouse-style condo with about 23% down. Its value has stayed pretty stable and I’ve kept the upgrades mostly reasonable.

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

Income:

I take home about $2,900/month after taxes, 403(b) contribution, HSA contribution, etc. An additional $70/month comes from checking and savings interest.

In a typical year, I earn an extra $800-1,000 freelancing. This could be much higher, but I turn down most projects since I already spend 45+ hours a week at a computer. I also inherited an IRA a few years ago; for 2013, my RMD will be $1,018.

Monthly Expenses:

Typically around $1700/month, broken down as follows:

• $665 mortgage
• $108 March extra principal (I add extra to subtract $500 off the balance every month)
• $130 condo association
• $225 utilities, TV & internet (12 month average; my gas bill is between $15-50 most of the year, but has gone as high as $101 during winter. $30 of my monthly internet bill is reimbursed by my employer quarterly, and I am in the process of switching TV/internet providers to significantly reduce that expense.)
• $200 gasoline, car insurance and maintenance
• $150 food
• $200-250 miscellaneous: clothing, personal care, household items, etc.

Property taxes ($2,300/year) and condo insurance ($300/year) come out of savings as they come up. I’d rather earn a little interest instead of having an escrow account!

Assets:

• $66,000 liquid checking/savings
• $50,500 403(b)
• $62,000 Roth IRA at Vanguard
• $56,000 inherited IRA at Vanguard
• $128,000 condo value (as of August 2012)

Debt:

• $87,000 remaining on mortgage
• No loans, credit card balances or other debt.

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

My next “unusual” expense will be taxes on the second half of my 2010 Roth IRA conversion - around $750 between federal/state/local. Otherwise, I don’t have any big planned expenses for awhile. I shouldn’t need to replace my vehicle (2009 Toyota Corolla with 30k miles) for years. My condo was refinanced in October from 30 years @ 5.75% to 15 @ 3.75%, which took me from $930/month to $775 (payment + extra principal).

I’ll continue to save after the tax bills are paid, by maxing out my Roth IRA ($1250 more for 2013), adding to liquid savings, and possibly setting up a taxable investment account and/or increasing my 403(b) contribution.

FMF readers, any thoughts on a taxable account vs. adding to my 403(b)? FYI: My employer doesn’t do a match; instead, I receive a generous percentage of my salary as their contribution. I’m currently saving 30% of my salary between the 403(b) (20% between my contribution and theirs) and Roth IRA (10.4%).

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

I want to keep saving as much as I can (especially months with more predictable expenses) and of course, continue to build my career. Now that my refi has completed, I also want to move my assets into a living revocable trust. I realize many people don’t have a trust on their radar, let alone people my age. :-) However, my parents ran into issues selling my grandfather’s condo after his death, and a realtor’s oversight cost them thousands in extra probate and lawyer fees.

Early retirement is always a nice thought, but that’d be many years down the road.

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

Besides the typical “don’t spend what you don’t have”, etc. I’m a big fan of keeping track of where I stand financially. I’ve been a Quicken user for years and think their new mobile app is pretty handy for entering transactions on-the-go. I track account balances and overall net worth on a basic spreadsheet at the end of every month. The spreadsheet started on a whim, but after 2 years, it’s motivating to see how much my net worth has increased in that short time frame.

I also check my overall asset allocation a few times a year with Morningstar’s portfolio x-ray. If something needs to be adjusted, I’d rather know about it ASAP so I can fix it as opposed to finding out years down the road!

Reader Profile: AH

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 AH. She answered my questions (in red below) as follows:

Please tell us a bit about yourself.

My husband and I are 27 and 25 years old, respectively, and we are newly married (2 months ago). He is currently in his last semester of law school, and I’m an active-duty military officer in the medical profession. We currently live on the east coast in a relatively expensive area where I am stationed until summer of 2014.

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

I’m currently the sole income earner, and we just completed combining all of our financial accounts a month ago. We also established a living trust, but have not funded it yet.

Our monthly income is as follows:

• Taxable: 2875
• Non-taxable (basic allowance for housing and subsistence): 2475
• After maxing out my Roth TSP contribution, our take-home pay is 3525.

Our monthly budget is below. Please note that this budget was created 2 months ago, so we are still adjusting it as we have a better idea of our actual expenses together.

• Rent & utilities (room in shared house): 700
• Cell phone (family plan with in-laws): 50
• Groceries: 200
• Dining out: 100
• Gas, transportation, parking: 200
• Health/fitness (racing fees, bike maintenance, clothes): 75
• Fun: 75
• Education-related: 75
• Misc: 50

After the fixed regular budgeted expenses outlined above, the remaining part of the income goes into savings. All irregular expenses (plane tickets, computer/laptop, car repairs, etc.) are also recorded in our budget spreadsheet, but do not have a specific line in the budget. When savings exceed our emergency fund (set at 20K for extra cushion, but we have yet to rebalance and need to do so) by a certain amount (which is usually several thousand) or when the stock markets drop dramatically and prices fall, then I will use the extra savings to purchase investments (ETFs, index funds).

Our net worth is as follows:

• Cash (savings, checking): 38000
• CDs (all at Ally bank, set to mature in 2016-2017, 1.74%-2.4%): 48500
• Investments (index funds & ETFs at Vanguard): 90000
• Roth IRAs: 54000
• Roth TSP: 3000
• Traditional TSP: 45000

I was fortunate enough to fund my post-secondary education through scholarships, so I never had to take out loans. My husband has the following loans:

• Undergrad: 11600 left
• Law school: 130000, unsubsidized Direct Student Plus and Direct Stafford loans. 6.8%-7.9%.

My in-laws started to pay his loans while he was in law school. They stopped last fall because they were saving for my sister-in-law’s wedding (we decided to postpone/forgo our wedding celebration at this time due to the costs). We and my in-laws are in the midst of discussing whether they are in a financially able position to help pay off his remaining undergraduate loans. We are very grateful for their help and their decision would not have any influence on our good relationship with them.

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

We plan to max out our Roth IRAs & Roth TSP. I’d like to convert the amount in my traditional TSP into the Roth TSP when that option becomes available, especially while our taxable income is currently low. I will graduate from my current position and be promoted in mid-2014. At this time, our choices for the next duty station are located in the states of Washington, Texas, or Hawaii, and we will find out in December 2013. I anticipate that we will be at the next location for approximately 5-6 years. Our goals are as follows:

1. Pay off all of the student debt as soon as possible. The interest rates on the loans are higher than those on our savings accounts and CDs. The CDs are at Ally Bank, which charges 3 months of interest if the CDs are withdrawn prior to their maturation, so we are considering using them to pay down the loans. The conflict that we have is that we want to be in a position to purchase a home when we move in 2014, if we are able to find a suitable and affordable property. I was planning on using the savings (this was before I decided to get married) as a down payment, but the interest rates on the loans frustrate me. We think that we would be able to take out a VA loan with no/minimal down payment and no PMI, but have not really looked into it yet. Readers, what are your thoughts on how to balance our goal of eliminating the student loan debt with preparing to buy a home if the opportunity arises? The implications of student loan interest deductions and the traditional to Roth TSP conversion are also on our minds, but we are not sure of how to take into account all these considerations.

2. Regardless of whether we purchase any real estate, we know that our expenses will likely increase. We currently have one car, since I prefer not to drive and can use other transportation means. However, this may need to change next year when we move since I may not have the option of walking to work. We would purchase a second used car, if necessary. We do not feel the need to have life insurance at this time and do not plan on purchasing any until we combine our incomes to purchase real estate or another purchase that depends on either/both of our income(s).

3. We’d like to be prepared to help any of our aging parents in the future, if necessary. This is more likely to happen with my parents than his. My parents were a bit older when they immigrated to America and started a family. Furthermore, they bought a property at the height of the housing bubble in one of California’s worst-hit cities, and we all highly doubt that they will ever recoup the lost. My husband and I are close to both of our families, so if they needed us to provide any financial support, that would be a priority for us.

4. Lastly, being a mother was never on my to-do list. Although my husband initially wanted to be a father when we first started dating, he later decided that he would rather have our marriage. We realize that I/we may change my/our minds, and if that happens, we’d need to change our plans accordingly.

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

I’ve always enjoyed working, so I foresee myself transitioning into a part-time retirement when I’m ready. My military obligation is quite extensive, so I plan to advance my military career until I reach my eligible age to qualify for a pension in the current retirement system (age 47, unless I opt for additional training in the future) at the very least. We foresee that the constant moving required for my career will have a large impact (most likely negative) on my husband’s career.

Husband: I would like to work as an attorney for the majority of my career. However if we are financially stable enough, I would like to retire from the law and work as a junior high or high school teacher until I retire. The constant moving is something that may also impact my career choices since it will be hard to establish a long-term career. Purchasing rental properties is something that I have some interest in and would love to be able to do so in the future.

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

These have been mentioned multiple times, but these are the ones that have worked really well for us:

• Have an early talk about finances with your partner. Early in our relationship, we made sure that we discussed and agreed on the following areas of life: in-laws, religion, children, and finances. It seems that many divorces occur because of one or more of these aspects. As in any aspect of life, set yourselves up for success!
• Be practical. Consider job prospects when you are applying for graduate schools, especially if you need to take out student loans.
• Be a lifelong learner. Not only does this apply in personal finance, but also in many other aspects of life. Connect with your community and those around you by learning from others and teaching others. Aspire and inspire.

Any advice, suggestions, or feedback would be greatly appreciated. Thank you, FMF and FMF readers!

Reader Profile: RV

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.   

Monthly expenses:

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)

Assets:

• $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 

Liabilities:

• None

Net Worth: 

• $1,297,000

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.

Reader Profile: KK

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

Please tell us a bit about yourself.

I am 30 years old and my wife is 28.  She is a Nurse at a University Hospital and I am a construction engineer working for a private firm.  We have been married for 2.5 years and live in a larger Midwestern City.  I was lucky enough that my company paid for me to get my MBA part time after work. It took me two years and I graduated in 2011.   We have a 16 month old and are expecting our 2nd child in September.  My friends would probably call me cheap but I prefer thrifty.  We were lucky enough, me because of my parents and my wife because of sports skills, to not have any student loans.

I have always used credit cards to gather points but lately I have started to “churn” credit cards.  It’s pretty crazy how fast you can earn free trips.   We put everything we can on our credit cards and pay them off monthly.  We haven’t had to touch our vacation fund for a year because of this and we have been on 3 trips requiring either flights or hotels.  Since our daughter will no longer fly free in the fall when she turns 2, I have really been focused on collecting even more points.  It’s a fun hobby!

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

I work full time and my wife works roughly 32 hours per week.  I contribute 8% toward a Roth 401k, my company offers no match but we expect to receive ESOP profit share allocations of roughly 5k this year.  Since my wife works for a state university her retirement benefits are top notch:  she contributes 10% and they contribute 13%.

Average monthly net income: 6600

• Mortgage – 940
• Prop Tax – 525
• Prop ins – 67
• Cable/internet – 145
• Cell phones –160 (100/month paid by employer)
• Utilities (water/gas/electric) – 250
• Gym – 90
• Day care – 250
• Term Life insurance (500k each) – 50
• Car insurance – 95\
• Car Payment – 505
• Groceries/diapers/household items - $700
• Misc baby items – toys/clothes - $250
• Eating out - 150
• Gasoline - 460
• 529 - 100
• Vacation fund - 100
• Savings - 650
• doctors visit copays average - 50

Assets:

• Employer retirement accounts:  130k
• Roth IRAs: 32k
• Taxable Accounts: 6k
• Emergency Savings: 21k
• Vacation fund: 3k
• House Value: 275k
• 529: 5k (grandparents are contributing also)

Liabilities: 

• Mortgage: 209k recently refied to 3.5% 30yr
• Car: 33k – 0%

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

It’s all about the kids.  We want to make sure we can offer our kids awesome opportunities:  elite sports teams, international travel, enrichment camps etc.  We know this is many years down the road but we figure we need to start now.  What’s sad about doing this profile is I look at our cash flow and I can’t figure where it’s all going!  We honestly have never had a budget but maybe it’s time to start tracking the outflow a bit closer. 

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

With each kid, my wife plans to work less and less.  Because the plan is 3 kids, I make a good effort to reign in on lifestyle creep.  Sometimes it’s very hard especially when close friends get caught up in it.  Retirement wise, we have no idea.  I would love to start my own business or pull a Tim Ferris type lifestyle change in the next ten years.  With one failed internet side business under my belt it can’t get any worse, only better!  We go back and forth on how much we should be saving for retirement.  As many people have talked about, we want to enjoy our 30’s and not have to wait until we are 60 to enjoy our savings.  I also want to start saving for a piece of land where I can build our next home in roughly 5 years.

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

We try to keep things simple.  We are pretty anal planners so we usually have a good idea of upcoming expenses.  We set a savings goal and adapt to it.  Sometimes I think splurging on a few items actually helps our finances because we feel the buyer’s remorse and we learn from it.  I think everyone interested in money should read the wall street journal, fortune & other personal finance mags, blogs etc.  I read both for the ideas and for the motivation.  I would like to thank all the others who have submitted profiles over the years.  I have learned a great deal from those profiles and this blog.

Reader Profile: NY

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

Please tell us a bit about yourself.

I am a 28 year old recent college graduate. I landed a job during my last semester and I am now a Business Intelligence professional. :) I am married and have an 18-month old daughter. I enjoy both reading and writing blog posts. When I got married 4 years ago I got addicted to the personal finance blogosphere; I wanted to make sure that I was able to put my family on good financial footing.

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

We are still working our way out of debt. We are down to one car loan left and two mortgages. I just joined the professional ranks and I am making approximately $70,000 per year. My wife is a stay at home mom. Here are the basics:

Assets:

• Savings: $4,500
• Car 1: $14,500
• Car 2: $11,450
• Scooter: $600
• Rental Condo: $108,000
• House: $271,000
  ------------------------------------
  Total Assets: $410,050

Liabilities:

• Car Loan: $12,000
• Rental Mortgage: $110,000
• New Home Mortgage: $256,000
  -------------------------------------
  Total Liabilities: $378,000

Monthly Expenses:

• Groceries: $600
• Car Loan: $250
• Recurring Bills (phone,subscriptions,gas,etc): $550
• Fun Money: $300
• Rental Loss: $300 (currently subsidizing my wife's brother while he finishes school)
• Tithing: $500
• Mortgage: $1300
• Savings: $1200

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

We have a number of things that we are saving for within the next 1-2 years. Our first order of business is to build up enough savings for another adoption. Adoptions are heavily subsidized by our church and our last adoption cost us around $9,500. In addition to the adoption we would also like to pay off the rest of our car loan, put a fence around our new house, and landscape our new house as well.

One area we are severely lacking in is retirement savings. We recently cashed out our Roth 401ks to help us with the down payment on our new home, and now we have no retirement savings. I am eligible for my company's 401k in April and we will start saving 6% plus the company match of 3% as soon as we can.

Additionally, my brother-in-law should be done with school soon and we will no longer rent our condo for a loss. We should be able to net $300 on the rental, helping us to pay down the balance of the rental mortgage.

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

Currently I am focusing on building my income level while keeping our expenses low. I anticipate that within the next 3-5 years I should be able to increase my salary by $15,000 - $20,000 as I am currently underpaid for my profession. I plan on paying off our car loan and then knocking out the rental mortgage as soon as possible. Eventually I would like to buy a few more rental properties. If all goes as planned, I intend to "retire" somewhere in the 45-50 range and work part-time as a professor at a local college. Ideally I would do that for 10-15 years and then retire for good.

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

My favorite piece of advice comes from Dave Ramsey: Live Like No One Else, So That Later You Can Live Like No One Else.

I believe in sacrificing now for the increased prosperity that it can bring you in the future.