hypothetical budget

**MonkeyMama** · 04-25-2014, 06:24 AM

Why wouldn't it work?

Seriously, don't you think that is a fine budget if you significantly reduce your housing costs? I don't think you have many expenses?

The numbers look remarkably like our own budget. Only $80k icome, so no 401k. Our spending budget is $4500 per month. That includes $2,000/month for mortgage and healthcare ($1,000/each). It sounds like you will likely get those mortgage numbers and insurance numbers down. Significantly.

In the past I had work retirement plans, when IRA limits were very low. Today I don't have a work retirement plan but $11k per year into IRAs is about 14% of our gross. Which I find more than ample for ROTH contributions. Since there are no future taxes on those. (& IRA contribution limits are now indexed for inflation, which helps. In the past, we'd have to save outside of ROTHs to get decent retirement contributions). At a $100k income, I would absolutely max out 401k first. Would put us mostly in the same boat (but with a LOT more to retirement, obviously).

We are MFJ with two kids and Fed tax was about $5k this year. Sounds about right with the $100k income/max 401k scenario.

$4500/month is more than enough for us to live *very* comfortably. Even with our massive health insurance costs.

You can also fund traditional IRAs for extra tax savings. I'd have to look up the limits, but I think $100k salary with 401k would qualify you both for Traditional IRA deductions. Off the top of my head. Our taxes have gone up so much over the last few years (higher income and fewer deductions), that we are doing Traditional IRAs for 2014.

P.S. This is all squarely in 15% tax bracket. Long term capital gains are taxed at 0% right now, for 15% tax bracket. So, we will throw Traditional IRA tax savings into a "taxable" account. That I don't expect to particularly be taxed. For now... We aren't contributing to 529s, because all those investments are tax free in our tax bracket, with some very minor tax planning. (So we don't have to deal with the 529 restrictions and fees - can invest anywhere).

**dczech09** · 04-25-2014, 05:16 PM

Just to put things into perspective...

The average HOUSEHOLD income in America today is about $50,000 per year. You make TWICE that! You should be fine, and if you're not, then a lot of other people are screwed.

The average income and a "liveable" income does vary by location, however you should be alright. Especially in WA.

I know that cutting your income can be scary. You get so used to living on one income, so cutting it seems scary. However, you have plenty of breathing room. With a $4,500 monthly budget, you can live comfortably. Many people get by with much less.

**LivingAlmostLarge** · 04-28-2014, 07:49 PM

Mm we live on $5k a month now with a large mortgage. But I find myself wondering what it would feel like to save so much less? It just might feel weird to save say 15% instead of 30-40%.

Dczech we don't live on much more now about $10k a year but double the salary. So it's a big shift in thinking to save a lot less. It's a bit unnerving. I am not sure if my DH is comfortable with it either. Since we could we've saved the maximum into everything. It's hard wired and to downshift so much is a bit unnerving. I am sure if we stuck to our current plan we'd be financially independent in 10 years for sure.

**dczech09** · 04-30-2014, 04:15 AM

Originally posted by LivingAlmostLarge View Post

Mm we live on $5k a month now with a large mortgage. But I find myself wondering what it would feel like to save so much less? It just might feel weird to save say 15% instead of 30-40%.

Dczech we don't live on much more now about $10k a year but double the salary. So it's a big shift in thinking to save a lot less. It's a bit unnerving. I am not sure if my DH is comfortable with it either. Since we could we've saved the maximum into everything. It's hard wired and to downshift so much is a bit unnerving. I am sure if we stuck to our current plan we'd be financially independent in 10 years for sure.

Understood. Yeah, I can see it would be a bit unnerving. You get used to bringing in so much and then to chop that down can be quite a hit. Especially going from 30% to 15% or so for savings would be dramatic.

On the Brightside, you have a "good problem"

I am sure many people would love to trade places with you, which is ultimately what I was getting at. Worse case scenario you are still in a good position. I would way the pros and cons of your "current plan" versus "new plan." If you want to reach independence sooner, and value that above anything else, then you would want to stick with your current plan.

Maybe you could do a combination of both. Like for example, you go down to the $100k income once the mortgage is paid off? That way you do not have that huge ball and chain. I could see that as being a good move.

hypothetical budget