Critique our finances?

[hiding]

(regular user, just didn't want this information to be linked back to me)

I feel like I need some guidance money wise to make sure MH and I are on track. Just critique and tell me if we are screwing up anywhere.

Me- 23, fresh out of college, just started a job making $40k/year, haven't even got my first paycheck, we just got married and combined money

Husband- 26, has been working for a few years, makes $49k/year

One thing to note is we just financed a move across the country and my husband and I are both taking the CPA exam right now, that is all of our credit card debt. When my husband passes the CPA he will get a $3k pretax bonus + yearly raise. I am unsure what my new employer does about the CPA and it's too soon to ask. Worse case scenario, I leave my employer after I get my CPA and find someone higher paying. It's common practice to increase salary by about $10k after getting the CPA in this city.

Retirement - $22k already (saving 15% both incomes)
Student Loans - $28k @ 4.5%, 10 years left
Credit Cards - $10k
My car- $15k @ 1.95%, 4 years left
Efund - $55k (was an inheritance, we can't touch it to pay off CC/SLs due to terms of the trust)
Savings for house down payment - $28k

We live in a VHCOL city and our rent is equal to a mortgage payment so we really want to buy within the next year. We can live off of Husband's income and all of mine is free to use.

So my idea was to pay off credit cards first which should go quickly and then focus on making extra payments to my student loans and beefing up our house down payment. After we buy a condo, I'd up the retirement savings. I wasn't going to worry about the car loan at all, it's a low-interest rate, I plan on keeping it forever, and it's a Toyota so it will hold some value.

Does my plan seem good?

eta: We have no plans for children in our future, if that makes a difference.

[Deleted]

what is the interest rate on your credit card debt?

[SJ]

If the interest rate on the credit cards is anything more than 0%, I would pay them off right away from the house DP savings.

[SJ]

Great job on saving 15% for retirement! Can you break that down? Are you saving in employer plans? Roth IRA's? Both?

[hiding]

I think the interest rate is somewhere around 13.5%

[SJ]

Also what does your budget look like? How are you doing on a monthly basis? How much extra do you have and do you plan to add to savings?

[mrs.spunky]

I think that is a good plan, depending on the interest rate.
What is the monthly minimum on the car and SLs vs. how much you will have to put towards them?
How much do you plan to put down on your home?
Do you really need an e-fund of 55k? Can some of that be diverted to your down payment?

ETA: Wait, I agree with pp. Pay off the CC now!

[theintended]

I would pay off credit cards and increase retirement right away. 15% is good, but the early years are so important, I'd be loading those accounts up as much as possible.

I wouldn't touch the student loans or the car loans.

I get the desire to buy a house ASAP, but keep in mind that while you spend the same on rent as the mortgage other costs of home ownership ultimately make it more expensive (utilities, repairs, lawn equipment, maintenance costs, etc.) Interest rates will likely be low through 2014, so I'd consider holding off on buying a little longer.

What are the terms on the trust? What can you use that money for?

[aspentosh]

Jul 31, 2012 11:12:23 GMT -5 hiding said:

I think the interest rate is somewhere around 13.5%

Yeah, pay that off with your house DP. Now.

[hiding]

Jul 31, 2012 11:11:57 GMT -5 SJ said:

Great job on saving 15% for retirement! Can you break that down? Are you saving in employer plans? Roth IRA's? Both?

9K roth ira- mine
11k 401k - husband
2k roth ira - husband

We are each set up for 15% of our paycheck to 401k, i just don't have anything in there yet.

eta: Ah! You guys reply so quick! Monthly we are fine. My husband's income covers bills, eating out, clothes, etc. Mine is free to save)

My car payment is $315, SL payment is $320.

My husband works for a Big 4 firm, I work for a small company. It's pretty standard in our city to get a $10K increase after CPA according to my husbands co-workers. I would probably find a new firm after I pass if my firm doesn't increase my salaray at all.

[fbf2006]

What's your monthly budget like?
Is your salary really going to go up by $10K after you pass the CPA? At the same firm or you mean if you look outside your firm? I'm a CPA and have worked in Boston and NYC and have never really heard that before.

[countthestars]

Is the efund just going to stay cash, or are you putting some of it towards your DP? Are you going to be able to put down 20% on the house? Does your rent payment = PITI or just the mortgage payment? Do you have room in your budget for other "house" things - higher costs of electicity/heat/AC, lawn care, snow removal, trash pick up, water, etc?

I agree that you shouldn't pay off the car early, but I would want to get rid of quite a bit of the CC debt before buying.

[dexteroni]

Paying off your cards, then paying off or at least reducing SLs, then beefing up your DP fund sounds like a good plan to me. It's what I would do.

A few things though. Your e-fund that you can't touch to pay off CCs / SLs - what *can* you use it for? IMO it's not a good idea to have your e-fund in money you may or may not be able to use. Can you use it for a down payment? If so, then switch your mindset - now you have $55k in a DP fund, and $28k in your e-fund, which, if you're living only on your DH's salary, is probably plenty.

Because you can live off your DH's salary, I would take your probably $2k that you'll bring home and put it all toward the CCs. Then if you feel you want to beef up your e-fund a bit more, maybe increase it to $40k. Also, I don't understand how you can live on a $49k gross salary in a VHCOL city? Where do you live? How much is your rent?

[gt7301b]

I'd pay off the credit cards TODAY from that 28K.

What amount do you estimate as your future mortgage payment?

[lys]

Get rid of the CC debt - ASAP! Take some of that 28K designated for a house and pay off the CC - then stop using it - or pay off in full monthly.

[SJ]

Jul 31, 2012 11:14:29 GMT -5 hiding said:

Jul 31, 2012 11:11:57 GMT -5 SJ said:

Great job on saving 15% for retirement! Can you break that down? Are you saving in employer plans? Roth IRA's? Both?

9K roth ira- mine
11k 401k - husband
2k roth ira - husband

We are each set up for 15% of our paycheck to 401k, i just don't have anything in there yet.

This is great. I would really try to max out Roth IRA's as well ($5K each).

Depending on your match, it might make more sense to put enough in the 401K's to get the full match, then max out the Roth's, then go back to the firm plans.

What is the trust earmarked for?

[hiding]

Jul 31, 2012 11:15:45 GMT -5 dexteroni said:

Also, I don't understand how you can live on a $49k gross salary in a VHCOL city? Where do you live? How much is your rent?

Trying to keep up with all the replies... We live in Milwaukee, our rent is $1195 + parking + utilities, we do just fine living off of his income.

[mrssavy42112]

Jul 31, 2012 11:21:07 GMT -5 hiding said:

Jul 31, 2012 11:15:45 GMT -5 dexteroni said:

Also, I don't understand how you can live on a $49k gross salary in a VHCOL city? Where do you live? How much is your rent?

Trying to keep up with all the replies... We live in Milwaukee, our rent is $1195 + parking + utilities, we do just fine living off of his income.

Wow, then I must be doing something wrong. I make $48K, have the same rent and live in what I feel is a M-HCOL area, but definitely can't do it just off of my income. Kudos to you.

[Deleted]

haha MKE is not VHCOL. sorry.

[hiding]

Jul 31, 2012 11:23:12 GMT -5 mrssavy42112 said:

Jul 31, 2012 11:21:07 GMT -5 hiding said:

Trying to keep up with all the replies... We live in Milwaukee, our rent is $1195 + parking + utilities, we do just fine living off of his income.

Wow, then I must be doing something wrong. I make $48K, have the same rent and live in what I feel is a M-HCOL area, but definitely can't do it just off of my income. Kudos to you.

It pays the bills and our extras like eating out. I'm not saying theres any extra money, but we are used to living like this.

[theintended]

How long have you been living on this budget? Maybe there are costs you haven't come up against yet? Feel free to post your monthly budget to get more feedback.

[SJ]

If you are used to living off his salary, I would absolutely use part of your salary to max out 2 Roth IRA's. It comes to roughly $420/month each. If you can do this plus continue with your 15% at work, I think you will be in great shape.

In case it hasn't been made clear, PAY OFF THOSE CC's with the cash DP fund ;D

[Deleted]

Agree with Sarajoy-- pay off the CCs!!

Don't be in a rush to buy. We rushed and made a huge mistake. The market is not going to rebound soon.

[ESF]

Jul 31, 2012 11:24:34 GMT -5 @iheartcosmos said:

haha MKE is not VHCOL. sorry.

I almost did a double take when I saw that.

I couldn't get past how two people earning combined less than 100k were going to buy a condo in San Francisco next year, and was all set to launch into a "your expectations are unreasonable" type of post.

Now that i know it's not VHCOL or even HCOL, then OP, I think you are doing fine and your expectations are reasonable.

[karinothing]

Jul 31, 2012 11:32:29 GMT -5 ESF said:

Jul 31, 2012 11:24:34 GMT -5 @iheartcosmos said:

haha MKE is not VHCOL. sorry.

I almost did a double take when I saw that.

I couldn't get past how two people earning combined less than 100k were going to buy a condo in San Francisco next year, and was all set to launch into a "your expectations are unreasonable" type of post.

Now that i know it's not VHCOL or even HCOL, then OP, I think you are doing fine and your expectations are reasonable.

Ha, that is what I was going to say too. ;D I personally would not feel comfortable buying with CC debt. So, I would work on paying that down.

[hbomdiggity]

Pay off cc and save for a 20% dp. There is no need to rush to buy a place.

[countthestars]

Yeah, MKE is MCOL. I would def pay off the CC debt before buying. Great job on the retirement!

[shopgirl07]

Jul 31, 2012 11:32:29 GMT -5 ESF said:

Jul 31, 2012 11:24:34 GMT -5 @iheartcosmos said:

haha MKE is not VHCOL. sorry.

I almost did a double take when I saw that.

I couldn't get past how two people earning combined less than 100k were going to buy a condo in San Francisco next year, and was all set to launch into a "your expectations are unreasonable" type of post.

Now that i know it's not VHCOL or even HCOL, then OP, I think you are doing fine and your expectations are reasonable.

Yeah, I was going to be like how in the Christ do you think you can afford a condo/house in a VHCOL on a $49K salary?

[tardyfortheparty]

Was it a typo to sat VHCOL? Otherwise pay off the CC and you are in good shape.

[jenjen]

Are your firms not paying any portion of the CPA Exam? I worked at a Big 4 and they paid for your study materials (becker) and one of each exam. Also, I don't think it's "too soon to ask" about your employer - I'd ask if they are willing to pay for any portion of the exam for you. You and your H could probably share study materials. I've also never heard of a $10k salary increase for passing so I wouldn't count on that until it actually happens.

Like others, I'm wondering what you can use your trust for - can you use it for a house? If so, take your DP money and pay off CC's immediately and then plan on using the trust $ for a house.