Am I in good financial shape?

[jp1988]

I am just curious if I am in good financial shape. I worry sometimes about not being where I should and just looking for some advice if I am on track and what I could be doing better.

Here's a broad overview:
Married (Both 28yrs)
No kids (hopefully soon)
Combined income = $78,000
Emergency savings = $15,000
Combined Retirement savings (403b and 401k) = $16,000
Monthly Retirement Contributions = $850 (includes employer match)
Mortgage Balance = $206,000
Home value = $240,000
We pay our credit cards off every month
No car payments
No school debt
We pay an extra $200 a month on our mortgage trying to get rid of our PMI
We both of Life Insurance (Me = $400k Her =$150k)

Next year my wife and I are both getting raises. My plan is dump all that into a ROTH IRA and max that out.

I'm currently getting my Masters which is taking up some extra money. After that's done I would like to save to pay down our house below 20%. And then save to buy some rental properties.

Longterm I want to get into rental properties. My family has been doing that for years and that is attractive to me. But I'm probably 7-8yrs away from that.

Am I in good shape? Is there anything else I could be doing differently to set myself (and my wife) up better for our future?

[rennigade]

You may want to back off the 401k and start maxing your Roth IRA's right now. At the very least get the company match for the 401k...then fully fund roth iras...then go back to the 401k and invest more.

As far as life insurance goes...at this moment do you really need $400k for yourself? Not sure how much you could save by bumping that down to $150k...same as your wife. Now when you have kids thats a different story.

Other than that you guys are doing great. Only debt is mortgage...no student loan debt...nice padded ER fund...nice work.

[jp1988]

You may want to back off the 401k and start maxing your Roth IRA's right now. At the very least get the company match for the 401k...then fully fund roth iras...then go back to the 401k and invest more.

As far as life insurance goes...at this moment do you really need $400k for yourself? Not sure how much you could save by bumping that down to $150k...same as your wife. Now when you have kids thats a different story.

Other than that you guys are doing great. Only debt is mortgage...no student loan debt...nice padded ER fund...nice work.

Thanks for the input!

I've thought about starting my Roth IRA sooner. I'll have to look into that.

We are planning on having kids soon which is why I went with $400k. It only costs $360 a year verse my wife at $240 a year. I figured I would get it locked in while I'm young and healthy. I guess I could have waited, but I didn't want to risk some freak disease coming along.

[Jluke]

I've thought about starting my Roth IRA sooner. I'll have to look into that.

roth contributions are $5500/person. Individual accounts must be set up - can't be joint accounts.

The 2017 Roth Contribution can be made on or before Tax Day 2018; so you could fund the 2017 Roth in April 2018 if you wanted to.

If your goal is the rental business, then the 401k may not really matter as much to you since you'll need money to acquire those properties.

Do you have a 30-year mortgage?

[jp1988]

roth contributions are $5500/person. Individual accounts must be set up - can't be joint accounts.

The 2017 Roth Contribution can be made on or before Tax Day 2018; so you could fund the 2017 Roth in April 2018 if you wanted to.

If your goal is the rental business, then the 401k may not really matter as much to you since you'll need money to acquire those properties.

Do you have a 30-year mortgage?

We do have a 30-year, but we are on track to pay it off in under 20.

[Eagle]

I am just curious if I am in good financial shape. I worry sometimes about not being where I should and just looking for some advice if I am on track and what I could be doing better.

Here's a broad overview:
Married (Both 28yrs)
No kids (hopefully soon)
Combined income = $78,000
Emergency savings = $15,000
Combined Retirement savings (403b and 401k) = $16,000
Monthly Retirement Contributions = $850 (includes employer match)
Mortgage Balance = $206,000
Home value = $240,000
We pay our credit cards off every month
No car payments
No school debt
We pay an extra $200 a month on our mortgage trying to get rid of our PMI
We both of Life Insurance (Me = $400k Her =$150k)

Next year my wife and I are both getting raises. My plan is dump all that into a ROTH IRA and max that out.

I'm currently getting my Masters which is taking up some extra money. After that's done I would like to save to pay down our house below 20%. And then save to buy some rental properties.

Longterm I want to get into rental properties. My family has been doing that for years and that is attractive to me. But I'm probably 7-8yrs away from that.

Am I in good shape? Is there anything else I could be doing differently to set myself (and my wife) up better for our future?

Looks like you guys are on track for success!

You have no consumer debt, your cars paid off, no student loans.

A few questions to better understand your situation: (I apologize in advance this list just kept growing)

1. How many months expenses does the $15,000 emergency fund represent?

2. What % does your employer match on your 401k?

3. What % does your wife's employer match on her 401k/403b?

4. What industry do you work in? Are you using your masters to get into another industry or to get a promotion/salary increase?

5. You mentioned PMI on your mortgage... How much longer before you can get rid of it?

6. You mentioned wanting to have kids hopefully soon. Have you thought about starting a savings accounts specifically geared towards baby expenses? Is your home baby/kid friendly?

7. If you're interested in buying rental properties have you considered getting into mutual funds through say www.Vanguard.com or www.Fidelity.com ? Mutual funds wouldn't necessarily be retirement accounts but would allow you a nest egg to start the rental property process. To get you started see http://www.investopedia.com/university/mutualfunds/

8. To rennigade and Jluke's points about Roth IRA's here's a link to get you started in understanding this investment. Can you each get a Roth IRA through your employers? https://www.irs.gov/retirement-plans...ibution-limits

[Eagle]

Jp1988, I'd also check out this article: http://www.financialsamurai.com/how-...ulated-by-age/



Note: Focus on the ratios, not the absolute dollar amount based on a $65,000 annual income. Take the expense coverage ratio and multiply by your current gross income to get an idea of how much you should have saved.

So at age 28 looks like you should've saved $32,000 to $97,000 by now. Looks like you're right around that with your EF and 401k savings.

[Eagle]

That said, the best way to get a pulse on how you're doing financially is net worth IMO.



At 28 you should have an average net worth of between $80,000 and $250,000.

If you include your vehicles or other assets not listed I'd assume you'd surpass the $80,000 mark in net worth given than you have $15,000 EF, $16,000 401k, and $34,000 in equity in your home.

[msomnipotent]

Do you have a general savings fund for when you have to replace cars, appliances, a roof, etc? Some people would just take it out of their EF, but I prefer to keep it separate, if possible. Can you refinance your mortgage to get rid of PMI and maybe get a lower rate? If you are really set on paying it off in 20 years, the interest rate might be lower for you. I'm in the market and was doing some calculations yesterday. A 15 year loan was a full point lower than a 30 year, and the payments were not that much more. Although personally, I wouldn't go less than 20 years because you have a lot of expenses coming up if you are going to have kids soon. It isn't just clothing and food. Your health insurance, dental insurance, life insurance (as you are already aware), and other things go up as well.