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Old 07-09-2008, 09:28 AM   #61
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I am in the same boat. I'm 37, live in NJ. We make 230k gross and I'm struggling to save 25%. 600k fixer upper with roughly 85k poured into it already in improvements. Sure it's a nice house in a very nice area and yes those translate to increased value for the house but what will it return long term as opposed to a mutual fund I cant say.


*sigh*

I'm trying to tell myself that 25% plus the home principle per year is not bad. Sometimes I'm not very convincing.
Yet again, if you include what you pay in taxes (NJ property taxes ), it will probably be down to around 140-150k after tax, and then you are saving 55-65k PLUS principal means you are actually saving about 40% of after tax money.
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Old 07-09-2008, 10:09 AM   #62
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I think citricacid needs a new tax accountant if they think one needs to pay $80k-$90k in taxes on a $230k income.

We had similar income last year. AGI gets reduced by $41K in our case for 401k contributions. SS taxes are capped at around $6k per worker. We get plenty of schedule A deductions (had to pay an extra $12 or so in AMT though), children help with exemptions. We've structured investments so there we have virtually no Schedule B income and Schedule D usually shows a loss despite plenty of unrealized capital gains.

So income, FICA, and property taxes come out to about $50K a year. That's $30k to $40k less than our tricarboxylic acid friend estimates.

From reading these forums, I come to the conclusion that many CPAs are clueless about saving taxes on investments. One would be well-served by reading and understanding how to limit one's taxes.
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Old 07-09-2008, 10:22 AM   #63
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I think citricacid needs a new tax accountant if they think one needs to pay $80k-$90k in taxes on a $230k income.

We had similar income last year. AGI gets reduced by $41K in our case for 401k contributions. SS taxes are capped at around $6k per worker. We get plenty of schedule A deductions (had to pay an extra $12 or so in AMT though), children help with exemptions. We've structured investments so there we have virtually no Schedule B income and Schedule D usually shows a loss despite plenty of unrealized capital gains.

So income, FICA, and property taxes come out to about $50K a year. That's $30k to $40k less than our tricarboxylic acid friend estimates.

From reading these forums, I come to the conclusion that many CPAs are clueless about saving taxes on investments. One would be well-served by reading and understanding how to limit one's taxes.
Try to guess NJ Property Tax for 600k home as well as state taxes and I would estimate it closer to 65+

But, alas, I probably overestimated it slightly... but definitely think you can not get below 65k in total taxes for 230k a year in NJ at 600k house
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Old 07-09-2008, 02:04 PM   #64
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Federal and state ate up about 27% of my personal gross going by my W2 form, I max my 401k. I assume my wife had a bit more percentage wise withheld. Property taxes are another 12.5k per year so that's around 4-5%? We just had our first deduction child 3 months ago

Take home after all taxes is 150ish I believe. Thats so disgusting. Though we got back about 7k due to the mortgage interest so maybe adjust that up a bit actually.

How does AGI get reduced by 41k for you LOL?
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Old 07-09-2008, 02:19 PM   #65
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As Nords has said... 22% is impressive as a percent...

But IMO someone who is making $170K should have a LOT of disposable income... the question is where is all that money going Let's say that the one person was right and you have after taxes and such $120K to play with... minus the $37K in savings gets you to $83K spending money...

Now, this is more money than most people even earn... and they are living just fine.... so there is some hole in your bucket that is leaking money a lot...

Some more numbers... $83 -$24 mtg is still $59K... or almost $5,000 per month... I just don't see where it can all be going.... without a lot of toys and a lot of 'extras' that are not needed...
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Old 07-09-2008, 02:43 PM   #66
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If you are over 50, you can contribute $20,500 to your 401K - with your wife, that comes to $41,000. If you are under 50, just be thankful :-).
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Old 07-09-2008, 05:31 PM   #67
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As Nords has said... 22% is impressive as a percent...

But IMO someone who is making $170K should have a LOT of disposable income... the question is where is all that money going .
That's just not always the case. Just like OP and some other's we live in an expensive area. $500K get's you a fixer upper. Throw on $10K easy for property taxes and then start with all the other expenses of owning a home and it isn't all that much.

My wife and I are in the same income ballpark and we have to work HARD to get to our 30% savings target.
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Old 07-09-2008, 06:08 PM   #68
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Texas Proud, we are going to examine the finances more closely to see where the holes are. But like saluki mentioned, housing is a lot for us.

Did some more number crunching, and also realized we had our income go up dramatically this year. Last year my salary was 80k and DW's consulting brought in about 35k. I got a management job at the end of last year upping me to 93k, then my raise in April brought me to 97k, DW has only been bringing in 6k a month since the beginning of this year when more work came on line. So as this money has come on line, we've been upping our lifestyle, not our savings (except the 401k which is set as a %).

So today I upped my 401k by 4k annually as a first step. A couple months from now we'll see how we are and up our retirement accounts again, and keep squeezing until it starts to hurt. Hey, now we are closing in on 25%.

I really appreciate everyone's candor and perspective.
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Old 07-09-2008, 07:22 PM   #69
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I forgot to add my voice to the litany of folks saying 2X% is an impressive number, especially with a wife, kids, and pricey house.

I also like your approach of setting your savings on autopilot. I bet you won't notice this first belt-tightening.

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Old 07-09-2008, 08:03 PM   #70
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I've never actually calculated my savings % til this thread, so I thank you for that. I think the gross income has a lot to do with things though....as has been mentioned. Saving 40% of a 40k gross income is a lot more impressive to me that saving 40% of a 175k income. Nonetheless....the key here is that you realize what's going on...so make the adjustments you see necessary and move on. And dont skimp on those fun things....like Brewer said...once the proverbial bus runs you over it doesnt matter how much you saved...it matters how much you LIVED

for the record I am saving about 30% of my gross income (50k calculated after my business expenses...so not TRULY gross),and nearly 36% of my income after fed,state,local, and property taxes. Remember that we live in a housing market where even 100-110k can get you a solid, outdated house with property taxes of only $1500/yr.
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Old 07-09-2008, 08:06 PM   #71
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Hmm, I'm starting to feel like a low wage earner here... Maybe it's the government job?
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Old 07-09-2008, 08:16 PM   #72
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That's household income, 2 earners, both with M.S. degrees, in high priced Southern California, if that helps any, Bimmerbill. DW is paying her full S.S. and Medicare tax as she is self employed.

We are going to shoot to getting to 30% going to "Net Worth Improvement". I count principle payments on the house since whether or not you see the house as an asset, you must see the mortgage as a liability.
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Old 07-09-2008, 08:27 PM   #73
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I also like your approach of setting your savings on autopilot.
Just wanted to underscore that. I swear by autopilot savings. Otherwise I'd blow a lot more on who knows what.

401k to max from direct deposit. Employee stock plan from direct deposit. The only thing I do manually is sell the employee stock and put those proceeds into mutual funds.
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Old 07-09-2008, 08:40 PM   #74
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You might want to track that credit card spending to see what exactly you're spending the money on. I enter all my receipts into MS Money instead of downloading from my credit card accounts. That helps me to know where my money is going.
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Old 07-10-2008, 08:45 AM   #75
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That's household income, 2 earners, both with M.S. degrees, in high priced Southern California, if that helps any, Bimmerbill. DW is paying her full S.S. and Medicare tax as she is self employed.
No need to make excuses, glad you are doing so well!

My wife is a SAHM and we can afford to do that. She will probably go back to work once DD goes to school.

Sometimes I wonder if I have the drive to get out there and make the big bucks. Sounds like too much work! Even my gov't salary puts me well above median income so I shouldn't gripe too much.
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Old 07-10-2008, 09:30 AM   #76
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Hmm, I'm starting to feel like a low wage earner here... Maybe it's the government job?
Yeah, but you get some benefits in retirement most of us only dream we could have, so it will even out over time...........
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Old 07-10-2008, 10:37 AM   #77
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Yeah, but you get some benefits in retirement most of us only dream we could have, so it will even out over time...........
I have 14.5 years to go until minimum retirement age, so a lot can change. Hope I'll still be set up with a pension by then. Healthcare bennies may not be so valuable since I think we will have some sort of universal care by then.
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Old 07-10-2008, 11:12 AM   #78
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No need to make excuses, glad you are doing so well!

My wife is a SAHM and we can afford to do that. She will probably go back to work once DD goes to school.

Sometimes I wonder if I have the drive to get out there and make the big bucks. Sounds like too much work! Even my gov't salary puts me well above median income so I shouldn't gripe too much.
DW stayed at home with the kids, too. This consulting was supposed to be just a few hours a week, and has now turned into 25+. Our bedroom is now half office, and I upgraded the wireless network so she can click on the laptop in the backyard. We made her time with the kids the top priority (of course) so we got a gardener and a cleaning service and hired her little sister as a mommy's helper once a week and hired Olivia's Godmother to help with the kids once a week as well. These aren't free, but the expense made sense as DW has more work than she knows what to do with and all of these combined are paid for the month with just a few hours of her consulting rate. I joked we are a micro-economy unto ourselves. Trickle down indeed.
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Old 07-10-2008, 11:53 AM   #79
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DW stayed at home with the kids, too. This consulting was supposed to be just a few hours a week, and has now turned into 25+. Our bedroom is now half office, and I upgraded the wireless network so she can click on the laptop in the backyard. We made her time with the kids the top priority (of course) so we got a gardener and a cleaning service and hired her little sister as a mommy's helper once a week and hired Olivia's Godmother to help with the kids once a week as well. These aren't free, but the expense made sense as DW has more work than she knows what to do with and all of these combined are paid for the month with just a few hours of her consulting rate. I joked we are a micro-economy unto ourselves. Trickle down indeed.
We ended up doing something similar. DW stays home with the kids and continues her profession (career counseling) in private practice on a part time basis. She was having trouble scheduling clients because baby sitters kept bailing on us. So we finally committed to our longest serving sitter that we would use her for X hours a week minimum and that the minimum would be subject to a "take or pay" deal (she gets paid teh min weekly regardless of whether we use her that week). Worked out well for all concerned, thus far.
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Old 07-10-2008, 12:07 PM   #80
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Laurence - I like your idea of calculating "Net Worth Improvement" ... paying down debt may not be as glamorous as accumulating a stash, but especially when the debt is related to solid investments (a home, education) it is definitely improving your true net worth to get rid of that debt.

Another single income family here, DW is home with the little one. She might have some opportunities for consulting work down the road, but not while he's still so young and while I'm working long hours and unable to really help much around the house.
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