Spending and saving - overall, am I doing ok?

[gvs.psych]

Hey folks - I've read many of the articles on this site, listened to the podcast, and for the most part am trying to follow the advice. However, I think I could really use some input on whether I'm doing good/bad/ok with my financial decisions.

Current situation:

• 29, just became an attending. Spouse, 26, is in NP school, one more year to go.


• Bought a condo during residency, moved out of city. Have a tenant that just covers expenses. $40k equity but would be hard to sell.


• About $18k in bonds, and $15k in tax deferred retirement accounts


• No debt


• Salary about $300k per year including moonlighting


• No kids, paying for spouses NP school (still another $25k to pay over the next year)

Expenditure:

• Rent/cars: $3300


• Food/eating out: $900


• Clothes/other stuff: $300


• Vacations/traver: $500


• Other bills (phone, electric, gym, netflix): $300

Savings:

• $1500 per month in tax deferred retirement


• $10k per month in bonds, with hope of buying a house in a year or so, at which point that monthly amount would go into mutual funds

Rounding up, we live on about $6k a month, which is more than I would like. But, I feel that spending more on some things allows me to work harder. I think that i could cut my spending to $4k if I worked less and made closer to $200k.

So I feel we are not quite maintaining a 'resident lifestyle', but that the moonlighting is sort of balancing that out. I'd love any input though. Our goal is to be independent by 50.

[Donnie]

Doing great. You don’t need to live like a resident anymore if you don’t have any debt in my opinion. Lifestyle is allowed to creep up a bit at that point.

I would put cash you need in a year into a savings account or CDs. You are probably taking interest rate risk on your principal if you are investing in a bond fund that isn’t worth whatever minimal excess spread you may be getting.

[djohnflatfeecfp]

Please tell me when you say "monthly amount would go into mutual funds" you mean low-cost indexes costing no more than .10%.

[gvs.psych]

I currently use Vanguard, would imagine doing the same when I have more to invest also?

[PhysicianOnFIRE]

Looks solid. Muni bonds would be preferable to total bond fund since it sounds like you're investing that money in a taxable account.

[countryphysician]

May be good to have some of those bonds in a money market or savings account as an emergency fund for 3-6 months worth of living expenses (in your case $18-36k).

Also, didn’t see mention of any own occupation disability insurance. Check into that with an independent agent.

Start contributing to a 401k through your work to the amount they will match your contributions. That’s free money from them.

If you have a high deductible health insurance plan, consider opening a health savings account an maxing it out with $3400/year.

Start a Backdoor Roth IRA with what you feel you can afford to the max.

Of course, when investing in the tax deferred accounts mentioned above always remember to follow the principles of:
* Wide diversification
* Buy and hold
* Keep costs low

I’m new to this game too. And thanks to this website and bogleheads, my views and life has totally changed.

[Zaphod]

If that bond fund is for your future house I'd be very careful as you are running interest rate risk. While it hasnt occurred too much, it would not take a big move to wipe out a lot of principle at these levels. Agree with CDs/MM.

[wideopenspaces]

Why not put the money for the house downpayment in an ally savings account? No risk and you earn a little bit of interest.

I'd also consider waiting 2 years to buy a house-you're both young, what's the rush? That way you could put 60k +18k towards retirement for each of the next 2 years and have a healthy retirement fund going, rather than just 18k/year, which is a pretty tiny sum given your salary. You could still put 60k towards the house downpayment each year. Just something to think about.

But to answer your question, overall you are doing ok :-)

[hightower]

Agree with the above.  Question: 1500/month in tax deferred, I assume that's your 401k?  You can count any matches you get as savings as well btw.  Also, contribute to a backdoor roth each year and open an HSA if you have a high deductible health ins plan.

What do you mean by cars/rent 3300/month.  You say you have no debt, so if you have a monthly car payment it must be...Please say you're not leasing!?

With regards to your condo.  I would work on selling it.  Why do you think it would be hard to sell?  In my opinion that's a risk to hold on to and I think it would be smart to get rid of it while the housing market is up.  Sounds like there's not much equity in it which means it will take many years of being a landlord to build up much equity.  Meanwhile you'll be paying the costs of upkeep/repairs/upgrades, etc.  Get it off your plate and keep saving for your own house.  I wouldn't buy a house until that place is sold.  You don't want to get into a situation where you're paying two mortgages.

Otherwise, you're doing just fine

[gvs.psych]

Zaphod wrote:

If that bond fund is for your future house I’d be very careful as you are running interest rate risk. While it hasnt occurred too much, it would not take a big move to wipe out a lot of principle at these levels. Agree with CDs/MM.

Click to expand...

Thanks for this input - and sorry to ask for spoon-feeding, but I thought the risk was very low? In this case I purchased 'short term investment grade bonds'. I definitely don't want to risk wiping out principle.

[gvs.psych]

hightower wrote:

Agree with the above.  Question: 1500/month in tax deferred, I assume that’s your 401k?  You can count any matches you get as savings as well btw.  Also, contribute to a backdoor roth each year and open an HSA if you have a high deductible health ins plan.

What do you mean by cars/rent 3300/month.  You say you have no debt, so if you have a monthly car payment it must be…Please say you’re not leasing!?

With regards to your condo.  I would work on selling it.  Why do you think it would be hard to sell?  In my opinion that’s a risk to hold on to and I think it would be smart to get rid of it while the housing market is up.  Sounds like there’s not much equity in it which means it will take many years of being a landlord to build up much equity.  Meanwhile you’ll be paying the costs of upkeep/repairs/upgrades, etc.  Get it off your plate and keep saving for your own house.  I wouldn’t buy a house until that place is sold.  You don’t want to get into a situation where you’re paying two mortgages.

Otherwise, you’re doing just fine

Click to expand...

Regarding the car - haha yes, I am leasing. Sorry. I fully understand the disadvantages, its a strictly consumerist decision. I'm an absolute car person, I just love fast cars. I am totally ok with doing an extra 4 hour moonlighting shift a month to pay for my car lease, not have to worry about any maintenance, and reduce my car excise tax (Which is absurdly high). But yes, I admit this is stupid.

Regarding my condo - its a 70 condo complex and we bought it new, really enjoyed living there, but turns out about 20 people who bought were super leveraged and there are about 10-15 of the units currently for sale, with the prices trickling down. On the other hand I'm 5 years into the mortgage at a low fixed rate, so increasingly I'm contributing to equity each month, I have a 3 year tenant and the maintenance costs are very low. I would LOVE to not have to worry about the condo but if I sell it now I'll walk away with less than $10k.

[Hatton]

gvs.psych wrote:

Zaphod wrote:

If that bond fund is for your future house I’d be very careful as you are running interest rate risk. While it hasnt occurred too much, it would not take a big move to wipe out a lot of principle at these levels. Agree with CDs/MM.

Click to expand…

Thanks for this input – and sorry to ask for spoon-feeding, but I thought the risk was very low? In this case I purchased ‘short term investment grade bonds’. I definitely don’t want to risk wiping out principle.

Click to expand...

Bonds do have some risks just not as many as stocks.  Money that you are saving for house down payment and Emergency Funds should go into MMF, savings account, CD (with low early withdrawal penalty), or ultrashort bond fund.

[gvs.psych]

wideopenspaces wrote:

Why not put the money for the house downpayment in an ally savings account? No risk and you earn a little bit of interest.

I’d also consider waiting 2 years to buy a house-you’re both young, what’s the rush? That way you could put 60k +18k towards retirement for each of the next 2 years and have a healthy retirement fund going, rather than just 18k/year, which is a pretty tiny sum given your salary. You could still put 60k towards the house downpayment each year. Just something to think about.

But to answer your question, overall you are doing ok ????

Click to expand...

Thats good advice. The rush is that I play the piano very loudly late at night and it tends to annoy neighbors. Its what keeps me sane so its quite important haha. I guess we could just rent a house for 2 years though, once this lease expires, although rates are ticking up and that would involve two moves.

[Kamban]

gvs.psych wrote:

About $18k in bonds, and $15k in tax deferred retirement accounts No debt Salary about $300k per year including moonlighting No kids, paying for spouses NP school (still another $25k to pay over the next year)

Click to expand...

gvs.psych wrote:

$1500 per month in tax deferred retirement $10k per month in bonds, with hope of buying a house in a year or so, at which point that monthly amount would go into mutual funds

Click to expand...

I think I might be the wet fish here but I have a different view.

You are 29 and not in debt, which is good, but still have little in savings. You still have some loans to pay for your wife's education. The amount you are saving towards your retirement is only $18K per year on a salary of $300K. Yes, I know you have to pay taxes but that amount, but IMO that savings is low. Most of your planned savings is going towards the purchase of a future house when the experience with a previous house purchase has not been good.

Things can happen that can suddenly increase the spending. Maybe an unexpected child. Maybe a job salary reduction. Who knows. It would be better to start boosting your contribution towards your retirement now when the going is good and try to save at least 60K per year towards that.

Why not buy a house in 3 years when you would have save 200K in retirement and hopefully will have the additional NP income. That is the way towards wealth later in life and not have midlife savings crisis.

[adventure]

Welcome - I'd comment on a few things:

1. Yeah, the car(s) is/are stupid. I decided I loved not having to pay for a car more than driving a fast expensive car. Just think about it.

gvs.psych wrote:

But, I feel that spending more on some things allows me to work harder. I think that i could cut my spending to $4k if I worked less and made closer to $200k.

Click to expand...

2. I don't follow... you spend an extra 2k/month (6-4) so you can moonlight? Or you spend 2k on a car so you can drive to the job? I dont' quite follow. Or you spend money on going out to eat in a car so you are relaxed, so you can be rested to then go moonlight? (You probably have a sane line of thinking here, I'm just not following).

3. I agree w/ @Kamban. Save more.

4. Risk. I think you need to re-asses what risk means to you, your situation, and your decisions.

You managed to get to 30ish years old, get a medical education, stay out of jail, and get going in life. I don't get the sense you have a solid understand or gut feel for risk. You're in bonds (why? - there could be an answer) when you could be in a risk free "high interest" savings account getting 1.5%, or a CD at 1.5%+, etc. Why bonds? Why those bonds? Perhaps bonds aren't the best tool to be using. Perhaps you grabbed a random tool (e.g. bonds), but should have grabbed a hammer.

Same thinking here on the condo. If you'd only clear 10k on the condo, there is a good amount of risk that you're really close to being under water. I'm guessing you're within a few % of breaking even - this also means you're really close to selling. What if you are asked to pay closing costs, or the market gets soft when Trump does/doesn't do XYZ, or if your tenant moves, or, or. Perhaps consider if owning is worth the risk, or if non-selling is worth the risk of princple. Also, you shoul dbe paid commensurante with the level of risk on a given investment. Are you earning anything on thise one?

Same thinking here on the low savings rate.

Do you have the right insurance you need? Emergency fund? Seems like you're being risky and not saving a ton, and planning that you'll have even more income in a year, and then you can keep going in life. There is some comfort in knowing you have some more in savings.

It helped me to measure risk when I built a spreadsheet that showed me:

1. when we get out of debt

2. how many months of emergency funds we had accessible if something bad happened.

3. % of the way to FIRE, and when we can retire (FIRE) -- this one really changed my thinking. All of the sudden, a $XXX car payment, or savings increase has real implications.

 

Doing ok? Sure. Could do better? We can always.