Hi Money Minder,
Hey Money Minder,
I’m in the process of buying a house and figuring out my monthly budget. My paycheck alone won’t cover all our expenses, but I’m banking on some non-traditional income sources to make up for it.
I get about 100k a year in stock, but that amount can fluctuate depending on the market. This year, it looks like I’ll end up with around 130k in total, which is way better than the 50k I could have gotten in previous years. Luckily, I joined the company in 2022, so I dodged a bullet there.
Ideally, I don’t want to dip into my stock money, but the cost of living here in Seattle is high. My base salary is only 60% of my total income on the W2 form, so that’s a bit tight.
I’ve been pumping money into my retirement accounts too, putting 2k in traditional and 1k in Roth (mega backdoor). It’s been awesome watching it grow – I’m already at 70k+ in just 20 months!
We’ve cut back in some areas – we only eat out 2-4 times a month, and it’s always budget-friendly. We’ve paid off our cars and student loans aggressively, so the only debt we’ll have is the mortgage. Childcare costs are minimal because my wife stays at home.
As for the stock I get every year, I’m planning to use some to cover our living expenses, make an extra mortgage payment each quarter, and put the rest in a standard index fund. I sell it as soon as it vests.
I really want to put more of that stock money towards paying off our mortgage faster because I hate having debt looming over us. But I also need to bulk up our emergency fund. Having 4-6 months’ worth of expenses saved up was fine when we were renting, but I want to have 18-24 months’ worth now that we have a mortgage.
Thanks for your help,
Budgeting Beginner
Response from THE MONEY MINDER:
Thank you for reaching out to us. How can we assist you today?
"Hello There,"
Congratulations on going under contract for your new home! It’s great to see you planning out your monthly budget diligently. It sounds like you have a unique income situation with stock vests contributing significantly to your total earnings. While it can be challenging when your paycheck doesn’t cover all expenses, it’s commendable that you are strategizing to make it work.
Considering the volatility of your stock vest amounts, it is wise to have a practical plan in place. Using a portion of the stock to cover living expenses and making extra mortgage payments quarterly is a good strategy. Additionally, focusing on building up your emergency fund to cover 18-24 months of expenses, especially with a mortgage, is a responsible move.
As you mentioned, reducing retirement contributions could be an option to free up more cash flow for your current needs. Ensure you weigh the long-term benefits of retirement savings against your short-term financial obligations. It’s impressive to see your proactive approach to financial planning, including paying off debts aggressively and saving in various areas.
Remember, financial flexibility is key, especially with non-traditional income sources. Maintaining a balance between covering immediate expenses, saving for the future, and paying off debt is essential. Continue to monitor your budget closely and adjust as needed to ensure financial stability. Congratulations again on this new chapter, and best of luck with your financial journey!
Farewell from THE MONEY MINDER.
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