Annual Checkup


Dryer sheet wannabe
Feb 8, 2008
Hello again - time for my yearly checkup. I know this is very long and boring, but I like doing this largely because it forces me to look back on where we are and see how we're doing. Any comments or tips would be very welcome!

(Last year's post)

We've progressed since last year, but we are definitely spending more that before.


  • $176k owed on home (~$89k in equity)
  • $38k owed on student loans
  • $13k owed on new car loan (plan to pay this off in about 1.5 years)


  • $22k in cash (emergency fund + medium-term house savings)
  • $50k in 401ks
  • $7,400 in Roth IRA
  • $2,600 in taxable stocks (just started this after realizing we can no longer use the Roth due to our income)

Household income has ended up right around $140,000 for the last year, and looks to increase modestly this year. We're slightly over-paying the mortgage, putting 10% into 401ks and contributing another ~2% into stocks. We're also saving aggressively for home improvements/repairs so that we can pay cash for work over the next couple of years, and aggressively saving to pay off the car early.

I've also recently been granted some stock in the company I work for, which will hopefully mean a one-time lump of $100-$200k in 2-3 years when we sell the company.

We've been very happy this past year, and I don't want to rock the boat, but I'm conscious that this is our best opportunity to really squash some debt before adding a child (and I'm planning on starting my own business when my day job is sold).

My plan for the next couple of years:

  • Put some more money into the house, pay cash. In a sale, I expect we'd get our money back on most of the work done except maintenance. We're being smart about which projects to tackle.
  • Modestly increase 401k once some house projects are paid for (thinking we'll go from 10% up to 13-15%)
  • Tighten a few screws to increase stock purchases (aiming to go from 2% up to 4%)
  • Pay off the car ASAP, then add that to the monthly stock deposit
  • Should my day job sell as expected, use that cash to pay off most of our debt, give our stock portfolio a shot in the arm and fund my new start-up.
One point I'd like to address is that I had initially expected to contribute about $5k/year to my Roth IRA. That is not an option, as our income has pushed us almost entirely out of IRA eligibility (and we'll probably be pushed out entirely this year). I've begun buying stocks in a taxable account instead. I've had good results over the past few years, and I anticipate this portion of our balance sheet to grow rapidly over the next couple of years. Is there anything better that you would recommend doing with this money? Paying down my mortgage? Other investments?

I'm very excited today, because I can realistically see us building the life I've dreamed of us having. I feel like we've perhaps slacked a bit this past year, but not in any dangerous fashion - we've just gotten a little undisciplined and I should tighten things up a bit. Thanks for reading, and let me know if you have any thoughts!

1. Your stated household income of $140K is well under the Roth income limit for married filing jointly ($169K). I'm not presuming anything about your marital or filing status; just wanted to pass along this tid-bit.

2. Why wouldn't you be interested in funding a traditional IRA with after-tax money? Your money will still grow tax-deferred. Again, not criticizing your choices; I'm just curious.

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The traditional ira limits are even lower - $110k for a couple if I'm not mistaken.
I am assuming that a 401k counts as an employee retirement plan? Maybe that's wrong, in which case we would qualify.

We are indeed a married couple filing jointly, but we only qualified to deposit $400 this year. We had some extra income from some one time items. If we qualify again next year then we will probably drop the max in there at the end of the year.

Assuming IRAs aren't an option, what would you recommend?
401k is an employee retirement plan. You can fully fund roths for both of you (5k each) see Amethyst #1 above.
I would (and did) go eliminate the debt. The improved cash flow and lower levels of risk make the investing much more enjoyable and will make take a lot of stress out of adding a baby and reducing or eliminating an income.
Thanks for the replies, guys. Looks like traditional IRAs are not an option, but I went back and looked at the Roth IRA again to see why I didn't quality to contribute much this last. Looks like last year our total income was actually $176k, due to some one-time things.

This year it should be more like $140k, so we'll be back under the cap. I'll contribute to this before buying taxable stocks this year.

Beyond the Roth & the 401k, I suppose we'll reduce debt and add to our stock portfolio as extra cash comes up.
it seems like you are electing to live a high standard of living. DW & I make substantially less then you do and manage to save magnitudes more. not to say one is better than the other, as our goals may be different, or our journey different as well. just an observation that you may be able to look to the expenses to cut out some fat (if desired) to increase the cash flow.

also, don't confuse income and MAGI. If your MAGI is $176k, you should still be able to contribute a little bit to a roth. albeit, a small amount. this opportunity for 2010 goes away in about 2 weeks.

in last year's thread, you mention index funds, is there are reason you went to stocks or when you say "stocks" you actually mean index fund?
Yeah, you're right on, ronocnikral. That's what I meant earlier when I said we'd slacked a bit in the last year. Before we bought the house (and when I was single), I/we were much more serious about long-term savings. I don't want to give the wrong impression; we still live modestly, but we're putting cash flow towards short-term projects right now instead of long-term retirement savings.

We only spend money on reasonable things, but I'm so used to putting every dollar possible into savings that spending money on something like new windows bothers me.

Today we are still putting aside a lot of cash every month, but much of it goes to medium or short-term projects like home improvements, paying off debts, etc. (So I don't consider any of that to be 'savings') The proportionate amount that we save towards retirement has only increased a small amount since buying our home. (The money that had been going to saving for the down payment now goes to home projects and paying down debt.) Over the next year I aim to wrap up some of those short-term projects and redirect the cash to long-term savings.

If we decided to not pay off the car early, and stopped saving against house project/repairs so aggressively we could easily put another 8% or so into retirement savings. I'm opting to get out of and/or avoid high interest loans as a priority right now.

Just to resolve the ira question, I did indeed quality to contribute about $400 to my Roth in 2010. In 2011 it looks like I'll be back to the full amount, and plan to max it out.

In my Roth and my taxable account I have a mix of index funds, stocks and some other low-cost mutual funds. I'm pretty comfortable with my mix. It's aggressive, and I'm young.

Thanks for helping me get all that clear in my head!

Basic outline for 2011 is to cut expenses, try to finish some short-term projects, and then take the cash that was going to those things and 1) Max the Roth again, 2) Increase our 401k contributions, 3) Set aside as much as possible beyond that in a taxable market account.

This process really helps me crystallize what needs to happen. Thanks for keeping me in line, guys, keep the comments coming.
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