Confessions of an under-accumulator of wealth

[LOL!]

One more thing, your income appears to be on the cusp of losing some important tax benefits such as the ability to contribute to Roth IRAs and qualifying for the child tax credit. You can reduce your AGI by contributing more to your pre-tax retirement plans and that can keep that child-tax credit going into your bank account. But you have to plan ahead.

PS: it's very easy to eat very healthily with only take-out - after all you are in southern california. Maybe northern folks don't realize how healthy the california life-style can be.

 

[meekie]

Take out isn't healthy, and we've put some weight on since the second was born. We've been trying to work on that, and have done a few things to improve the snacking. We were throwing out a lot of rotting fruits and veggies and found these green bags that keep them fresh. Now we hardly throw anything out as they stay good enough to eat for quite a long time.

I'm in San Diego as well with a similar income and very similar toys, but no kids. I'm sure that helps us a lot, but eating out is still one of the expenses that creeps up on us every once in a while. I track and categorize everything we spend (although we have "allowance" for some eating out and going out).

I can see the months where we don't put any meals on the card vs the ones where we're charging dinner 3 or more times a week. Once you look at that 100s or 1000s a month in eating out with only weight gain to show for it, it really gives you some incentive to tighten up.

We're also very careful about spending our money. I really do want that new BBQ, but my old one does have a few more years in it, and we can wait. The wii - we were waiting in line the day it came out. It's all about priorities. I was wondering about those green bags - hadn't bought them cause I didn't know if they'd be worth it, but it sounds like they might. Had some rotten bananas this morning.

 

[Marquette]

My mom did a lot of cooking one Saturday a month. Everything went into the freezer to be pulled out during the rest of the month. Of course, freezer clean-out day was never fun. If it looked like it might work, it went in the pot. We called it garbage soup. Sometimes it tasted good, sometimes it needed salt.

 

[Lusitan]

We were throwing out a lot of rotting fruits and veggies and found these green bags that keep them fresh. Now we hardly throw anything out as they stay good enough to eat for quite a long time.

Would you point me in the direction of those bags? We also throw away too much fruit sometimes and I would love to find a way to reduce that.

While I understand that in the long term I can beat the 5.125% that I'm paying on the mortgage, it's still a big mandatory payment - almost $2,000 a month (20 year fixed). Our aggresive plan to pay it off has us debt free at 43 years of age, which will afford us some measure of FIRE sooner rather than later. I'm really torn by this one.

Yeah I have struggled with the same question. After maxing out tax-favored retirement plans, I always seem to end up just splitting the difference between additional savings and paying down debt like the mortgage.

 

[laurence]

One more thing, your income appears to be on the cusp of losing some important tax benefits such as the ability to contribute to Roth IRAs and qualifying for the child tax credit. You can reduce your AGI by contributing more to your pre-tax retirement plans and that can keep that child-tax credit going into your bank account. But you have to plan ahead.

PS: it's very easy to eat very healthily with only take-out - after all you are in southern california. Maybe northern folks don't realize how healthy the california life-style can be.

That's right, our tax preparer (step-mom) warned us of that, that's it, I'm upping the 401k

Lusitan:
https://www.greenbags.com/?cid=402572

p.s. they seem to work more than the advertised 10 times. Now we can let fruit really sweeten! Wal Mart and Costco are both carrying it now in my neck of the woods.

 

[wildcat]

I would be happy with the 22% if I could live in San Diego. I would love to tell you about my higher savings rate in Dec-Feb

I wouldn't sweat the savings rate - remember this board is full of Michael Jordan caliber players. And in some cases, I bet a few had 20-25% savings rates and along came that little bull market.

 

[P.S.]

Hi laurencewill,

i've read just a couple of the responses (and will be back to read all 'cause this is a great thread) but just wanted to say... I think you have got to be one of the richest persons on this board.
I don't mean it in a trite way. Or patronizing manner. But I've read your posts for quite awhile now.
I always hear a joyful living of life in your posts, which are full of tidbits of friends, colleagues, neighbors.
Man, you are rich rich rich.
One day the currency stuff will catch up with your goals.
Until then, your life is fuller than lots of millionaires I know (I don't know any billionaires, but I would guess them too). Take cheer!

 

[Marquette]

I would be happy with the 22% if I could live in San Diego. I would love to tell you about my higher savings rate in Dec-Feb

No kidding... I'm saving more than that, but I lost the "boys" to frostbite the last time it plunged to -50F with the wind chill. Turns out that your tongue isn't the only thing you should stick to a flagpole in February.

(yes, I'm kidding)

 

[RDamien]

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.

 

[laurence]

Hi laurencewill,

i've read just a couple of the responses (and will be back to read all 'cause this is a great thread) but just wanted to say... I think you have got to be one of the richest persons on this board.
I don't mean it in a trite way. Or patronizing manner. But I've read your posts for quite awhile now.
I always hear a joyful living of life in your posts, which are full of tidbits of friends, colleagues, neighbors.
Man, you are rich rich rich.
One day the currency stuff will catch up with your goals.
Until then, your life is fuller than lots of millionaires I know (I don't know any billionaires, but I would guess them too). Take cheer!

Well thank you! We are definitely rich in the things that matter, part of my motivation to FIRE is to spend more time with the family and friends around me I can't spend time with when I'm at work.

 

[CitricAcid]

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.

 

[LOL!]

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.

 

[CitricAcid]

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

 

[RDamien]

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?

 

[Texas Proud]

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...

 

[beowulf]

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 .

 

[saluki9]

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.

 

[laurence]

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.

 

[SecondCor521]

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.

2Cor521

 

[thefed]

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.

 

[Bimmerbill]

Hmm, I'm starting to feel like a low wage earner here... Maybe it's the government job?

 

[laurence]

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.

 

[RDamien]

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.

 

[KB]

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.

 

[Bimmerbill]

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.