November 14, 2024
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THE MONEY MINDER

‘Am I doing fine? Or do I need to reevaluate my expenses to save more cash each paycheck?’: I feel my financial situation is tight with a $170k compensation. How can I ensure I’m not overextended?

‘Am I doing fine? Or do I need to reevaluate my expenses to save more cash each paycheck?’: I feel my financial situation is tight with a 0k compensation. How can I ensure I’m not overextended?

Hey Money Minder,

I’m feeling a bit stressed about my finances. I make $135k, and my wife gets a $35k stipend. We’re hopeful she’ll land a job paying $100-150k soon. Currently, we’re living off $120k salary + $50k bonus, but it feels tight. Here’s the breakdown of our savings, retirement accounts, and debts:

  • Total Net Worth: ~$200k
    • Assets
    • Checking Accounts: ~$3k
    • Cash Savings in HYSA: ~$31k (around $20k really, after emergency reserve)
    • My 401k/Roth IRA: ~$100k
    • Wife’s 401k/Roth IRA: ~$25k
    • My HSA: ~$8k
    • Primary Residence: $23k equity
    • Rental Property Duplex: $26k equity
    • My Vehicle: ~$21k
    • Wife’s Vehicle: ~$7k
    • Liabilities
    • No Credit Card Debt
    • My Student Loans: ~$25k left
    • My Auto Loan: ~$21k left
    • Primary Residence: $257k mortgage left
    • Rental Property Duplex: $199k mortgage left

After all that, when I focus just on myself and my $85k base salary, I contribute 6.5% to my 401k, max out my Roth IRA, and HSA. However, despite my fixed expenses, I end up spending my leftover $1.3k each month entirely, without saving any cash until the bonus hits.

I can’t figure out how to cut back on expenses. I enjoy hanging out with friends, and it ends up costing me around $100 each time. Am I okay financially, or should I rethink my expenses to save more?

Cheers,
Financial Uncertainty

Response from THE MONEY MINDER:
Hello There,

Congratulations on being proactive about your financial situation and seeking advice. It sounds like you have a clear understanding of your income, expenses, savings, and investments, which is a great start. However, it’s understandable that you are feeling the squeeze with your current financial commitments.

Based on the breakdown you provided, it appears that your fixed expenses are quite high, leaving you with limited wiggle room to save. I would recommend taking a closer look at your variable expenses, such as groceries, dining out, and leisure activities, to see where you can make some adjustments. You mentioned that you don’t eat out too often, but even small savings in this area can add up over time.

Consider creating a detailed budget that outlines your monthly income and expenses, including both fixed and variable costs. This will help you identify areas where you can cut back and allocate more towards savings. It might also be worth reviewing your auto loan and mortgage to see if there are any opportunities to refinance or lower your monthly payments.

Regarding your retirement contributions, while it’s great that you are contributing to your 401k, it’s understandable that you feel the 6.5% contribution is low compared to your previous savings rate. Once your wife finishes her PHD and starts contributing to your combined income, you can revisit your retirement contributions and potentially increase them to a level that aligns with your financial goals.

In terms of socializing with friends, it’s important to find a balance between enjoying life and staying within your budget. Consider having more budget-friendly get-togethers or exploring free or low-cost activities in your area. Being open with your friends about your financial goals can also help set expectations and prevent overspending when you hang out.

Overall, it seems like you are doing a good job of managing your finances, but there is always room for improvement. By making small adjustments to your expenses and staying focused on your financial goals, you can work towards saving more each month and achieving greater peace of mind. Remember, financial stability is a journey, and it’s okay to reassess and make changes along the way.

Farewell from THE MONEY MINDER.

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