Another "How am I doing?" Thread...

[i_am_the_slime]

I know this forum gets a lot of these, but sometimes it helps to hear comments/suggestions from others. So, how do you feel I'm doing? Should I be saving more?

As for my feelings, I realize that I'm obviously not doing horribly. I'm definitely in a better spot than a lot of people because I do have an EF and retirement savings, so I do feel blessed in that regard. However, I bought a house 6 months ago and since buying the house I haven't saved as much as I used to. I used to put $1000 into savings and $500 into retirement every month. Since buying the house, I have been putting $300-400 into savings and $500 into retirement each month, despite the fact that my mortgage is the same as my rent was. This has me a little nervous, but I think "new house" expenses will go down soon.

Age: 29
Net income: $3800 per month
Savings: $25,000
Retirement Savings: $70,000
House Value: $130,000
Mortgage: $115,000 @ 4.375%
Car: 11 years old, 150k miles (May need replaced soon)
Student Loan Debt: $15,000 @ 3%

[maat55]

I think you are doing fine. You may want to dedicate some of your savings and savings contributions as car fund monies. You do not need to borrow when you buy your next car.

I would likely pull some of the savings and apply some of the savings contributions towards paying off the student loan faster.

[mcfroggin]

Originally Posted by maat55

I think you are doing fine. You may want to dedicate some of your savings and savings contributions as car fund monies. You do not need to borrow when you buy your next car.

I would likely pull some of the savings and apply some of the savings contributions towards paying off the student loan faster.

Why? The rate is only 3%. I would drag that out as long as possible. If you make even 4% in the stock market yearly, you earn more than paying off your loan early.

The OP is definitely doing pretty well. Keep up the good work. New home expenses are a little expensive in the beginning, but the tax deductions (if you work them right) should help you out down the road.

If you don't already have a home business (even if part time), consider it. It will help greatly. It doesn't have to be big. Just something that brings in some income, and the tax deductions will help greatly with new home expenses. My website explains some home office deductions in blog form. It takes time to learn the home tax deduction rules, but being able to take nice tax deductions on home expenses can come in handy once you purchase a home.

[MonkeyMama]

I also think you are doing very well.

Once you have the "8 month emergency fund" and have the money to replace your vehicle (I'd aim to pay cash - or at the least have the cash, if you don't want to tie it up), and get the new home kinks worked out, I believe you should be able to lower your monthly cash savings. I suppose it depends what your other financial goals may be. But, saving for home maintenance and your next car would probably be your priority. At $100/month you can save up very slowly for the car after next - if you start right away. Home maintenance - usually recommended at 1% - 3% value of home - to save annually. Depends on state of repair of home and any expected expenses you may have.

You don't have much equity in home, so you may want to consider building up 20% equity. Just to lessen the chance that you end up under water. The lack of equity sticks out at me.

$6,000 per year into retirement - how much is that as far as a percentage of gross? What kind of retirement accounts are you utilizing? Is it all going into a 401k? Some of it into a IRA? I am just curious if you are being tax efficient.

I think it's a worthy goal to pay off the student loan, but I would make it a low financial priority with the low interest rate.

[i_am_the_slime]

Originally Posted by MonkeyMama

I also think you are doing very well.

Once you have the "8 month emergency fund" and have the money to replace your vehicle (I'd aim to pay cash - or at the least have the cash, if you don't want to tie it up), and get the new home kinks worked out, I believe you should be able to lower your monthly cash savings. I suppose it depends what your other financial goals may be. But, saving for home maintenance and your next car would probably be your priority. At $100/month you can save up very slowly for the car after next - if you start right away. Home maintenance - usually recommended at 1% - 3% value of home - to save annually. Depends on state of repair of home and any expected expenses you may have.

You don't have much equity in home, so you may want to consider building up 20% equity. Just to lessen the chance that you end up under water. The lack of equity sticks out at me.

$6,000 per year into retirement - how much is that as far as a percentage of gross? What kind of retirement accounts are you utilizing? Is it all going into a 401k? Some of it into a IRA? I am just curious if you are being tax efficient.

I think it's a worthy goal to pay off the student loan, but I would make it a low financial priority with the low interest rate.

I consider my bare bones budget to be $2500, so $15,000 is a 6 month EF. But I know in the near future I will need a car and possibly house expenses so I have been hesitant to tie up additional money.

I did only put 10% down when I bought the home. I had been planning to buy and was worried about interest rates going up but I didn't want to tie up all my cash. I paid a lump sum of $1,500 for PMI, but to me it was worth the peace of mind to keep some liquidity. Might be a mistake, but a small one at least.

As for retirement, I put $6k per year and my employer matches half of that. So, $9k deposited into my 401k per year, which equates to 12% of gross. Whenever I can I contribute to a Roth IRA - $18k of the $70k retirement is in a Roth.

[maat55]

[quote]

Originally Posted by mcfroggin

Why? The rate is only 3%. I would drag that out as long as possible. If you make even 4% in the stock market yearly, you earn more than paying off your loan early.

It's a small debtfree hurdle.

[kork13]

I pretty much agree with the others... You're doing good overall. Healthy retirement, adequate emergency funds (6-8 months' expenses is the "standard" advice), and what appears to be a manageable debt load.

Keep saving as you are for retirement, and definitely start setting aside cash to buy your next car (whenever that might be). Saving for home maintenance/repairs is also a smart idea. If the student loans make you nervous, you can consider paying those off sooner. But the rate is decent, so not necessarily a critical need.

Are you expecting any upcoming pay raises that would allow you to save a little more? Or, is there room in your budget that you could lower your expenses and free up some money each month? Just some ideas on how you might consider focusing your savings:
- $100/mo as additional principle payments on your mortgage, which will help lift your equity stake in the house
- $200/mo for home repairs/maintenance expenses (since you seem a bit worried about the upfront costs of ownership, this is a higher than average" amount)
- $200/mo for car savings
- $100/mo "fun money" (think vacation savings--because I think it's important to have YOU as a line item in your budget)
- Later on, you might consider opening a taxable investment account as a means for you to save/invest for the medium/long term outside of retirement. Add maybe $200/mo to start getting into some decent mutual funds and just start saving there as well.

Understand, those numbers are based on a higher level of savings, and given your current income, the $800/mo there might be too much right now. Perhaps cut everything in half for now just to get started along the road, and as you're able, slowly increase those amounts. As we've said, you're doing good -- so don't take any of these suggestions as gospel or critical requirements... just some ideas of what I'd do in your shoes.