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Old 03-03-2008, 11:35 AM   #21
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I think it would be more appropriate for OP to back out how much he is saving and if it is enough for his plans...spending varies on this board based on values and doubt you will get consensus...
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Old 03-03-2008, 11:37 AM   #22
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Quote:
Originally Posted by Khan View Post
Why would you need preschool when there is a SAHM?
Well, I sort of have to look at it as the price/penalty I pay for Americanizing(for the good parts, certainly not the consumerism) my kids. We're both first-generation immigrants, I speak fluent English/Chinese but my wife only speaks ok English(and lacks American cultural background), so naturally we speak Chinese at home. I don't want my kids to start school playing catch-up or to go through what I had to go through when I first came the States in my teen years(feeling alienated and different.)

I realized it's a hefty price tag and I don't really have to do it if I don't want to but my instinct just tells me that I should.

Kid #1 is fluently bilingual now (preshooling in English gave her a big boost) and is one of the top students in her class.
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Old 03-03-2008, 11:51 AM   #23
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"My situation: early 40's, two kids in elementary school, married, house paid for, DW a SAHM. By luck and tenacity Megacorp has done well and have kids college paid for (maybe.)

We live in a high expense area - Southern California. That said, we feel we are pretty frugal, but not misers.

I am looking at my monthly expenses and can't see how we could reduce them further without some pain:

Food - ~$800/month
Household stuff ~$500/month (includes home maintenance, repair, etc.)
Kids education ~$500 (school, classes, activities, etc.)
Medical ~$300 (stuff not covered by insurance, and we are pretty healthy)
Insurance (Life, Auto, etc.) ~$300
Utilities ~$300
Cash for incidentals ~$200
Gifts, charity ~$250"

Looks good to me--congrats on having a paid-off house. And although "charity begins at home" it is also important imho to help others and have your children learn this (and you don't seem to be hurting so you probably don't miss the $250/mo too much)--this is about what we give to our church/UnitedWay/fundraisers.

This year I have been looking at our expenses as an annual percentage of gross income. It made it real easy to cut some things out when we looked at them that way especially for things that we didn't use that often.
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Old 03-03-2008, 12:23 PM   #24
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i see a few areas for possible trimming...at your discretion...
you mentioned driving "beaters". if you have collision on them, is the ins rate per year too high? i just reduced my auto ins on my "beater" by eliminating collision. saved $110 per year. it's a 92 accord with 127K miles and rust. not an issue in SCal, but go to kelley blue book and see what your beaters are worth. then get some other ins co quotes and decide from there. also maybe combine all ins policies at one company and get the discount for 1 stop shopping.

food bill...no clue what you COL is. food costs are always lower for non-processed items. since i FIREd, i have taken a long hard look at my shopping list and eliminated all pre-made food items. also changed stores for certain items. found a little mom-n-pop butcher shop that beats any of the chain stores on meats/vegs. only shop when i'm downtown anyway vs special trip. and i bring a short list. the longer we are in the store, the more we tend to buy.
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Old 03-03-2008, 10:28 PM   #25
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No, I think the insurance is pretty reasonable - some of the cost is due to an umbrella policy since we have a relatively high NW.

Others have pointed out that my list didn't tally up to $4500 - the "hidden" ~$1500 is in things that seem random but always add up to about this much every year (like major appliances dying, major home repairs, a particularly expensive vacation, finally replacing some crappy furniture, etc.)

I suppose many of these were in fact discretionary, but it is still a question of lifestyle. Even Thoreau didn't spend more than two years in the woods...

I think the best thing for us would ultimately to go to a lower COL area. DW is certainly amenable (neither of us are CA natives and would like to get the hell out of here in the next couple years.)

Thanks for the comments everyone



Quote:
Originally Posted by freebird5825 View Post
i see a few areas for possible trimming...at your discretion...
you mentioned driving "beaters". if you have collision on them, is the ins rate per year too high? i just reduced my auto ins on my "beater" by eliminating collision. saved $110 per year. it's a 92 accord with 127K miles and rust. not an issue in SCal, but go to kelley blue book and see what your beaters are worth. then get some other ins co quotes and decide from there. also maybe combine all ins policies at one company and get the discount for 1 stop shopping.

food bill...no clue what you COL is. food costs are always lower for non-processed items. since i FIREd, i have taken a long hard look at my shopping list and eliminated all pre-made food items. also changed stores for certain items. found a little mom-n-pop butcher shop that beats any of the chain stores on meats/vegs. only shop when i'm downtown anyway vs special trip. and i bring a short list. the longer we are in the store, the more we tend to buy.
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Old 03-04-2008, 06:47 AM   #26
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i think it's great that you are looking at the big picture. understanding the problem leads to solutions.
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Old 03-04-2008, 11:24 AM   #27
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cut each expense listed by 5% or 10% some way, some how. The take that savings and invest it.

Quote:
Food - ~$800/month
Household stuff ~$500/month (includes home maintenance, repair, etc.)
Kids education ~$500 (school, classes, activities, etc.)
Medical ~$300 (stuff not covered by insurance, and we are pretty healthy)
Insurance (Life, Auto, etc.) ~$300
Utilities ~$300
Cash for incidentals ~$200
Gifts, charity ~$250
Get food down to $720/month. Maybe $250 at grocery store every other week, then $220/month to eat out. You can cut this by 10% without issue. Invest the $80 (if 401k available- use this and save on taxes now).

Household expenses of 6k per year? Like what- can you cut this to $5400/year and invest the other $600? Invest the $600 for this ($50/month) in a taxable account in case the repair is more expensive than planned.

Medical $300. Can you get all these expenses pre-tax? $3600/year is a high amount of money to spend on medical and get taxed on. Just getting this whole amount to pre-tax will save you around $900 in taxes (25% tax bracket) Invest this $900 savings in a pre tax account (like a 401k).

$300/month for insurance is $3600. Can you lower this $30/month by cutting something out of the policies?

My suggestion

a) look to get 2 months cash in the bank. This should allow you some savings because insurance might be cheaper if you don't finance and just pay the bill when it comes.

b) once you get 2 months expenses in the bank, continue building savings to 4 months expenses, while also investing some of money with more moderate returns. A savings account might get you 2%, where as a money market might be 4% and some 30-70 mutual funds might return 6%. I would have 2 months expenses at local bank, then look to invest other cash type assets into mutual funds with a higher return profile.

c) look to save money pre-tax. Health care and 401k would be at top of this list.

In my case we have 3 months expenses in CDs, plus another months in our accounts (so paychecks this month pay bills for next month). We have a 4th months expenses in a mutual fund. The interest on the CDs gets put into this mutual fund (PRPFX) which is expected by me to grow around 6% per year. We'll have the money needed for house repairs in this fund as well, plus car payments get put here (when cars get paid off). We use 401ks for most savings, HSA for health care spending- so tax efficiency is high (we paid 8% effective tax rate in 2007 living in Ohio).
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