My Late Attempt at Smart Money

[OldNavyGuy]

I just retired from the Navy after 20 years at the end of June. I've started my new career and have been looking at my finances a bit. Sadly, this is first time I've tried to manage them EVER.

Personal/family situation -
It's just me (37) and the wife (38); we don't have any children. After retiring from the Navy, I now work at a telecommunications company. My wife stays at home.

Ugly Money -
I lowered all of our bills as much as I could. I even consolidated our credit cards into a loan to control the monthly payments better. Our monthly expenses are about 70% of my net income. This covers EVERY recurring expense (mortgage, car and house insurance, internet, cell phones, food and gas, etc.).

I'm contributing what appears to be a "standard" 10% to my 401k through my new employer and they match 3%. I will receive my military retirement check every month for the rest of my life to supplement my retirement funds.

Since we're covered by Tricare, we're not eligible for a HSA.

We're putting 25% of my net income in our EF which still has a ways to go before reaching that six month goal. The last 5% we use for our date nights/entertainment fund so we don't go insane on our new budget.

Now my questions -
1. Is this situation as ugly as I think it is?
2. Any advice on what I could/should do differently to prepare for the future?

I'm sure I forgot something, so please feel free to fill my inbox with nasty-grams. Thanks in advance.

[disneysteve]

Welcome to the site.

I don't think your situation is ugly at all.

You are saving 10% for retirement. That's on the low side as the rule of thumb is 15% BUT you have a military retirement as well so you're probably okay there.

You are living on 75% of your take home pay and saving 25%. I think that's fantastic! Once your EF is fully funded, you can direct a little more toward spending and continue saving for other needs. For example, you can raise your spending money to 10% of take home and use the 20% remaining to fund your Roth IRAs, save for your next car, vacation, home repairs, etc.

A very broad budget plan is 50-30-20 which is 50% for needs, 30% for wants, and 20% for savings. That's based on gross income. You might want to run the numbers and see how close you come to that. I suspect you're not far off.

The one area you might want to explore in more detail is where the 75% is going. Generally, when people come here and say they've lowered bills as much as possible, that turns out not to be true once they actually share their numbers.

Overall though, I think you're doing just fine!

[OldNavyGuy]

A few details

Thanks disney. I guess it looks worse to me right now because we've never really used a budget before. Your 50-30-20 numbers were pretty close when I figured gross instead of net.

Here's a bit more of a breakdown to see where/if I can cut more.

Net Income/Expense
Military Retirement---------------------$1399
New Career-------------------------------2703
Total----------------------------------$4102

Mortgage-----------------------------------507 (fixed 3.2%)
Loan----------------------------------------570 (fixed 5.1%)
House taxes--------------------------------125 (savings account to pay directly)
House insurance---------------------------175 (paid directly monthly)
Electricity-----------------------------------250 (usually closer to $200)
Cable/internet-------------------------------19 (employee discount is awesome)
Cell phones---------------------------------110 (Verizon)
Water/trash----------------------------------65
Car insurance--------------------------------54 (monthly payment for 2 cars)
Tricare supplement--------------------------77 (they cover $3000 cap)
Gas------------------------------------------120
Food/pet care-------------------------------800
Total-----------------------------------$2872

Some of the numbers are a little high to make sure we gave ourselves enough room. When we don't use the full amount, the extra goes to our EF.

[FLA]

I think you're right on track. After the EF is funded, I would consider increasing the 401k to 15%

and welcome to the site

[disneysteve]

Loan----------------------------------------570 (fixed 5.1%)
Food/pet care-------------------------------800
When we don't use the full amount, the extra goes to our EF.

How much of the food/pet care bill is food and how much is pet care?

How much is your EF currently?
When you don't spend the full amounts listed, you're probably better off putting the extra toward the loan rather than the EF as long as you have at least a couple thousand set aside.

Overall, having seen your numbers, I would reiterate that you're doing just fine.

[snafu]

Welcome to SA. We all have different backgrounds and experiences so different visions are offered. Congratulations and best wishes as you [and wife] transition from military to civilian lifestyle. There are several threads that discuss small savings which are an interesting read if you are interested in further lowering regular expenses. SA offers a 'Blog' section which focusses on goals setting ideas, charts to track loan pay downs and monitor personal Net Worth.

I suggest you use one of the free options to identify your [FICO] type credit score because it factors into many aspects like cost of insurance, interest rates on various types of credit. I wonder what you see as your next major purchase? One thing that has potential for problems is if you are still running revolving credit card balances in conjunction with a consolidation loan.

Do you know what you are holding in your employer's 401K plan and the fees associated with those holdings?

[Jluke]

Here's a bit more of a breakdown to see where/if I can cut more.

Net Income/Expense
Military Retirement---------------------$1399
New Career-------------------------------2703
Total----------------------------------$4102

Mortgage-----------------------------------507 (fixed 3.2%)
Loan----------------------------------------570 (fixed 5.1%)
House taxes--------------------------------125 (savings account to pay directly)
House insurance---------------------------175 (paid directly monthly)
Electricity-----------------------------------250 (usually closer to $200)
Cable/internet-------------------------------19 (employee discount is awesome)
Cell phones---------------------------------110 (Verizon)
Water/trash----------------------------------65
Car insurance--------------------------------54 (monthly payment for 2 cars)
Tricare supplement--------------------------77 (they cover $3000 cap)
Gas------------------------------------------120
Food/pet care-------------------------------800
Total-----------------------------------$2872

good job - when I joined I thought I had a good surplus of cash from my monthly pay, but after a few changes now I am stretching my budget to the max. here are a few thoughts.

401k - 10% is good, but you are allowed to contribute 18k/year...

ROTH IRA - I didn't see a line item for these contributions. 5500/year.

Mortgage - What is the loan term, balance? Have you considered a 15-year mortgage? Wish I had your property taxes at 125/month; I'm pushing 600/mo.

Auto/Home Insurance - You should be able to save money if you start paying them in full rather than monthly. I assume they are through the same insurance provider. typically auto is 6 months in full; home is 12 months in full. I also switched providers after 20+ years and saved money.

Cell Phones - Look into using a pre-paid carrier. I use virgin mobile but there are many out there that are affiliated with the big carriers, including verizon. I pay 33.45/month per phone. It works for us.

Hopefully one or more of the above helps.

If you like investing, look into bogleheads for their approach to investing.
There are a lot of books out there - one always recommended is Millionaire Next Door
There are plenty of apps/software for tracking finances - people always mention Mint, YNAB. I use excel and Quicken.
Then there are the extreme money guys - mr money mustache is one.

[InvestorShark]

You're doing very well... I'm jealous of your mortgage!... mine 8x that

If you stick to this budget, you'll be in very good position in a few years.

Some recommendations for what to do with the rest of the monthly income:
1) 3 month EF: treat the $1200 overage as an expense actually, automatically deposit it into the separate account and make it hard to withdraw from (don't link it to your checking... online banks like Ally are good for this)
2) Put the $1200 into paying off the loan, completely
3) Finish the EF and save a total of 6 months
4) Save $1200 for a nice vacation (cruise, Mexico, whatever)

5) Adjust the retirement contributions:
- I'd only do 3% into the 401K when steps 1-4 are done
- Max out your annual contributions to your ROTH IRA, preferably invested in low-cost 100% equity ETFs (Schwab has many with $0 transaction costs and very low management fees), $5500 a year (should go up to $6K soon)
- Anything remaining, increase your 401K contribution, or even open a normal brokerage account to have some fun investments to manage

6) Relax and place everything on auto-pilot, you'll be retiring young!

[GoodSteward]

I'm just jumping in on the cell phone bit. If you use Verizon and want to save money go to Page plus. Prepaid service on the same network. You can use any Verizon phone with them, even the newest. Just need a page plus sim, and a phone that isn't activated currently.

I use page plus and have my payments set on auto pay using my rewards card. They give a discount for auto pay. I'm paying 37$ a month for unlimited calling/texting and 3GB LTE data then unlimited slow speed. More than enough for me since I'm on wifi at work and home. That would save you around 36$ a month. I know it doesn't sound like much, but why pay more for the same?

I assume you are not a data hog since you only pay Verizon 110. That looks like the basic plans they offer for a couple phones, or their 55$ prepay.