Our entire financial picture. Advice? Critiques?

[Deleted]

Warning: this will be long. ;D I was one of the ones who supported more open money talks here; I figured I should contribute if I want others to!

My SO is 25 and I am 22. He earns all the money. I am a FT grad student. We live in downtown Chicago. Net worth is currently at $131,000.

Retirement: $27,000 in 401(k) – 33% has already been taxed

Investments: $20,000 in Scottstrade. $11k currently invested, $9k moved this morning

Savings: $84,000

Income
Base: $115,000
Bonus: $70,000 ($44,000 take home each summer)

Budget:
Rent: $1,500 (includes cable, utilities, internet)
Food: $1,000 (avg $442/mo groceries; remainder on booze, eating out)
Shopping: $500 (work clothes, fun clothes, school books, home stuff)
Health/Medical: $200
Entertainment: $200 (non-food fun, domestic travel)
Cell: $150
Transportation and cabs: $100
Personal care: $55 (hair cuts)
Misc: $200 (this is mostly gifts, charity, random ATM withdrawals. We should probably create a separate line items and regularize charitable giving).

Monthly spending: $3,905
*BUT avg. monthly spending over past 6 month is actually $4,016 so we manage to lose $100/mo somewhere.

Take home: $5,533 (after retirement, insurance, pre-tax commuter card. he doesn't get any match for retirement and he maxes his 401k so that takes a lot each month).

Savings: remaining – usually $1,500/mo+


Other info:
No student loans – SO paid off $25k from his undergrad and we are paying for my grad school. By spring 2014, we will have paid $57,500 (after my scholarship) for tuition and insurance. This comes from savings.

I have no doubts about finding work in my field after I graduate (summer ’14). Median salary for med-SLPs in my area is $81,437, and earners in the 10th percentile make $68,224.

SO needs to get his MBA, probably in the next 2-3 years unless he can find a job with a hedge fund. Everyone (above his level) at his office has an MBA from Harvard, Stanford, or Northwestern. That will be expensive. He doesn't seem optimistic about getting an employer to pay for it. |-)

We plan to get married (2015? 2016? We could push it back if he was in school) and will be entirely responsible for the whole shebang. I don't even know what that would cost in Chicago. $40k?

We want 1-2 kids eventually (not for 8-10 years; again, I could push it back a little bit if timing wasn't right), so I'd like to be more conservative with savings than couples who know they'll be child free.

We lose our apartment May 1. We are definitely going to have to bump up housing costs, but I don't know by how much. 30% of his monthly take home would only be $1,650 and I don't see us finding anything in the area we want for that much.

I know we should be saving more for retirement, but how? Traditional IRA for him? Consider the Scottstrade money retirement funds? I read that IRA contributions must come from income, and I technically have none right now (unless my graduate assistantship counts?), so a roth IRA might be out of the question for me.

Any advice/critiques are welcome, particularly considering the big picture stuff. We're new at this and just kind of trying to wing it.

Thanks in advance! :drink:

[limey]

Your graduate assistantship is for a TA or RA position, right? Not a scholarship?

I used my TA/RA to fund a Roth in grad school.

[SJ]

I'd like to see you open and max a Roth IRA, but if you technically don't have earned income (I have no idea if your assistantship counts- do you pay taxes on it?) I don't think you can since you are not married.

On average how much are you adding to savings each month? The rest of the money ($1,000-$1,500)? I think only having $100/month difference between your budget on paper and your actual spending is terrific.

What about travel? Do either of you have a desire? This is a good time of life to see the world, but I know not everyone has the bug like I do.

I have no issues with your spending. You can definitely afford the shopping & food lines.

Also why didn't you mention Booth in your MBA list?

[rikki]

You guys are doing great! Really, it is very impressive!

How many people are you thinking of having at the wedding and what level of fanciness? My Chicago wedding was more than double your estimate. However, I think you could do it for less than $40,000, if you wanted to/tried.

[Deleted]

Do y'all have life or disability insurance?

[SJ]

I also think $84,000 is probably a touch high on the cash for you. I know he has a MBA coming, but I'd be surprised if he couldn't get some employer assistance on that front. Even so, you will have advance warning and another round or two of bonuses before then.

Good for you for moving some more over to Scotttrade. Keep it up!

[sillygoosegirl]

If you were married, you could find an IRA based on SO's income. I don't know what your "graduate assistantship" income looks like, but if you get a W2 for it in January and have to pay taxes on it, it should count.

Why are you putting off getting married so long? You're clearly pretty serious about each other if he is paying that kind of money for your tuition. And as combined as you make your financial lives seem to be, you really shouldn't put off getting the protection of marriage. I'm sure you aren't planning on it, but at this point you'd probably be way more screwed if he broke up with you than if he divorced you. Getting married doesn't cost $40K anywhere, unless you want it to. It would also save you a ton of money on your taxes, at least for as long as you are in school.

[Deleted]

No advice except to do the IRA and maybe put 1k into the market each month if you feel comfortable but can he do the CFA in lieu of grad school? My H's company (investment mangers so different from his field) will sometimes accept that.

Also I have to say I'm very impressed. I'm ten years older than you and I only started paying attention to financial stuff two years ago. At your age, I totally had my head in the clouds.

Eta: Also, and I'm sure you realize this, as he progresses in his career the bonuses will likely get a lot bigger. It's great that you are so serious and are already thinking about saving for a wedding and kids that are years in the future but the reality is that his income will grow a lot and take care of that (assuming he's successful of course). I think it's safe if you want to throttle back a bit on saving or use that money to travel and enjoy being young and unencumbered.

[Deleted]

I LOVE how supportive you all are being! I was so nervous to post.

Let's see: I don't know if my GA is considered taxable income. I "work" for it (6 hours a week when school is in session), but they also called it a scholarship. I will see if I get a W2. If I do, we will definitely open a roth for me ASAP since I'm not phased out by his income.

thanks Jenny. he doesn't work as much as he used to in banking. he's usually home by 7:30 or 8:30pm, so 11-12 hour days. feels like cake though in comparison!

sarajoy, we are adding the total leftover (so almost always $1,500/mo) to savings. December will be the only month this is less ($500) because of extra costs with Christmas gifts/end of the year charitable giving

I like the idea of travel, but logistically we never get it to work. my boyfriend has very little time off work, and we usually spend his vacation visiting his family in NJ. we also have flown to one out of state wedding each summer. neither of us were able to travel as kids, so I don't think we know what we're missing.

Booth is actually his top choice because we love Chicago so much, and it's a great program. (woot! I know we have some ladies from there on this board. ) but surprisingly no one from his office went there.

rikki, I have no idea how many people. the logistics of wedding planning stress me out. also $80k!? omg. hold me.

redbellpeppers, THANKS for the reminder! we looked into both for SO and I don't think we purchased them yet. very important. I will talk to him about it tonight.

sarajoy, thanks for the extra kick to get rid of some of that $84k. slowly but surely... haha. after he invests this next $9k I'll try to chip away another $5-10k. I think he's getting used to how it feels to let go.

sillygoosegirl, I guess I'm just in no rush to get married. I feel comfortable with the way things are. The wedding, to me, is more about a reunion with our friends and family and an announcement to the world that we're for real with this. I guess I don't want to make that announcement at 22 or 23, regardless of how committed we are to each other. right now I still feel kind of young, and I don't want to worry about feeling too young. I don't think I'd be "screwed" if he broke up with me, because I never had any of this money to begin with.

violets are blue, all credit is due to MM. you guys are great and I can't thank you enough! I had no idea how any of this worked before I started participating in discussions here. one day when we've really made it we'll have to make a large charitable contribution in MM's name, haha.

[Deleted]

Dec 19, 2012 15:36:04 GMT -5 RockNVoll said:

Does he get to invest in the firm's deals too? If so, take into account that he might want to reserve some capital for that (though he might be able to invest out of his retirement plan). That can eat up available investment dollars quickly.

this is a great question.

we've never discussed it, which makes me think either the answer is no or he hasn't ever considered it an option. I will also ask him about this tonight.

[auberge]

Some questions because I've never been a "kept woman" (loosely) for any amount of time. ::totes jealous::

How does money work between you?
Do you feel comfortable to spend what you want/need?
Do have a joint account already?


Details.....

[ijack]

Dec 19, 2012 15:29:48 GMT -5 tacom said:

rikki, I have no idea how many people. the logistics of wedding planning stress me out. also $80k!? omg. hold me.

r

this is so, so much less than my brother's chicago wedding was

[Deleted]

Dec 19, 2012 15:49:40 GMT -5 auberge said:

Some questions because I've never been a "kept woman" (loosely) for any amount of time. ::totes jealous::

How does money work between you?
Do you feel comfortable to spend what you want/need?
Do have a joint account already?


Details.....

haha, it's not so bad.

he is really, really, really great about making me feel like what he brings home is ours. I am an authorized user on two CCs - one at Target (we do a lot of grocery shopping here because it's a few blocks away) and the other is a regular Amex. I am free to spend what I want/need based on our predetermined budget (posted above). I can get cash back with the target card - and if I forget, I just ask him to pick up some cash from the ATM. I tend to spend more on shopping and personal care. he spends more on work lunches. he's okay with my spending as long as monthly spending stays at $4k a month, which we both monitor on mint. when either of us needs to make a larger-than-usual purchase, we discuss how to make it fit in the budget.

I am not listed on his savings or investment accounts, though I do have log in info for everything. when I mentioned the possibility of opening a roth IRA for me, he thought it was a great idea.

I only came into the relationship with the $2k I saved from college. that is kept as my own personal e-fund. I also have access to $7k (?) in unused credit, should he suddenly lose his mind and dump me. I obviously would need to get my hands on some SLs ASAP.

[h]

You have a shitload of savings for a 22 year old!

[Deleted]

Dec 19, 2012 15:55:30 GMT -5 ijack said:

Dec 19, 2012 15:29:48 GMT -5 tacom said:

rikki, I have no idea how many people. the logistics of wedding planning stress me out. also $80k!? omg. hold me.

r

this is so, so much less than my brother's chicago wedding was

tell me he just has expensive taste?

[aspentosh]

I think you are doing great. Thanks for sharing!!

[mellymel]

Thanks for sharing. You two are doing fabulously, especially at your ages. No advice from me other than what others have posted above. Keep up the great work!

[fbf2006]

Thanks for sharing! You guys are doing great! It'll be awesome if he found an employer to pay for his MBA!

[smock]

On the GA thing, you might want to ask someone at your graduate program. Sometimes they don't give you a W2, but the income is still taxable. I learned that the hard way the first year of my Ph.D program!

[Deleted]

Dec 19, 2012 16:50:01 GMT -5 fbf2006 said:

It'll be awesome if he found an employer to pay for his MBA!

I would DIE! lol

Dec 19, 2012 16:55:44 GMT -5 smock said:

On the GA thing, you might want to ask someone at your graduate program. Sometimes they don't give you a W2, but the income is still taxable. I learned that the hard way the first year of my Ph.D program!

yikes. thank you for the heads up. I will contact our department after the holidays.

thanks for the support all!

[kwynn]

Since you are fairly reliant on him for income, please yes do get life insurance (I speak as someone that had a DH with very high earning potential while I myself came in broke and didn't earn much money). I would also consider getting married as well since finances are so co-mingled.

You are doing great with the savings!

[mokes]

You're doing an amazing job at your ages.

If you can, I'd try to bank your income when you start working. If you never get used to living on both incomes, it will give you a lot of flexibility later on.

[Deleted]

Dec 19, 2012 21:57:43 GMT -5 kwynn said:

Since you are fairly reliant on him for income, please yes do get life insurance (I speak as someone that had a DH with very high earning potential while I myself came in broke and didn't earn much money). I would also consider getting married as well since finances are so co-mingled.

You are doing great with the savings!

oh kwynn, I've followed your story. thanks for the advice. we spoke tonight and I told him we need disability insurance to protect both of us and life insurance to protect me. he's on board.

Dec 19, 2012 22:12:39 GMT -5 mokes said:

You're doing an amazing job at your ages.

If you can, I'd try to bank your income when you start working. If you never get used to living on both incomes, it will give you a lot of flexibility later on.

this is our plan. we want to use most of it for investments and <$10k/year for international travel. per our conversation tonight, it sounds like we'll be booking our first big trip for Dec '13.

[Deleted]

Everyone has made great suggestions so far, so I have nothing to add but keep up the great work! Trying to convince a money person to invest more aggressively is hard work, so great job to you for convincing him to slowly move the cash over to your investment account.

My only suggestion is actually for your SO. If he really wants to go to b school, tell him to take the GMAT now and get it out of the way. I found that the older I got, the lazier I became. I lost my steam and was burnt out at 26 and, for all intents and purposes, lost my mind and ran away from finance. I miss my old income. A lot. That lifestyle doesn't work for me now but I wish I either a) got my MBA earlier or b) took the CFA so it would be easier for me to get hired at a more senior level after my hiatus from the work force. Your SO will have a much different story to tell, but at least get him started down the path of an MBA or the CFA. Options are everything in this world :-)

FWIW, DH and I are discovering that only certain companies these days will pay for the Executive MBA. Not many will send you back to a full time program like your SO wants to do. However, there are still a decent amount of companies out there who are willing to send people through the Executive MBA program (usually you are 10 years out of college, so older than the average full time MBA student) in return for a commitment.

Or, as I am discovering, you can find employment at a university who provides tuition reimbursement for your spouse as one of the benefits :-)

[Deleted]

choco, thanks for the advice. we are reading and discussing all responses now and he said he is going to start studying for the GMAT after the holidays so he can take it this spring. tuition reimbursement is a sweet deal though.

[Deleted]

Ok, there is no way a Chicago wedding needs to cost ANYWHERE near 80k. That's not an unrealistic number if you want to go all out, I guess, but there is no way in hell anyone I know in that area has ever paid 80k for a wedding.

My sister just got married out in the suburbs and paid around 15k for the whole thing, including photography and all the wedding details (minus ring and honeymoon, I guess). A friend ended up calling off her wedding but at a very nice place in the 'burbs she was set to pay about 30k. Another friend got married in a nice church downtown and had her wedding reception on a river cruise in the city, I think she paid around 25-30k. I'm not saying any of these are small numbers or anything, but certainly much less than 80k. Yeesh!

I'm amazed that your bf makes almost double what DH and I make together, and only takes home a few hundred more a month than we do. That doesn't seem right. It sounds like he's saving more for retirement than we are but unless it is several grand a month I can't imagine where the rest goes? I don't think IL state taxes are that much higher than ours (though they are definitely higher!).

Overall it sounds like you're doing great, I have no suggestions other than that if you don't know anyone to help you find a good apartment next spring, my BIL could help. He's a realtor in Chicago. As I'm typing this I recall I said this to someone in the past so I apologize if it was you and I'm being pushy Seriously though he's come across many decent 2 bedrooms at around that price range (that's the same range he and my sister would like to stay in) so I think you'll be ok if you move.

[Deleted]

bucky, thanks for the input!

I thought his take home was decent until I saw Jenny's and some others on the board. then I cried, lol. $1,416 goes to his 401(k) each month, he's taxed highly as a single individual, -$80 for his commuter card and subtract another $60 for health insurance (dirt cheap!), and you're at $5,500.

I'd love your BIL's contact info if he is familiar with the Loop. we're good with 1 BR -- totally happy to sacrifice space for location.

[Deleted]

Does his monthly income not include bonuses (or not all of his bonus)? That could make the difference I guess. His base isn't THAT MUCH more than our HHI... and yeah that's quite a bit more than we put into retirement. Still, seems low. It's so weird how different take home pay is for the same salary, different people!

I'll double check his business contact info and send you a PM!

[Deleted]

the $5,500 is only for base--his bonus is given as a lump sum of $44,000 each summer. so I guess "true" monthly income would be $9,167.

thanks!

[Deleted]

That makes more sense then. I was thinking total gross yearly income and wondering WTF was happening to the poor guy where they were taking all his money