Cash Hoarding & Budget Post

[gbcnaeforme]

Hi!  My name is GBCNaeforme, and I am a cash hoarder.  I truly value the knowledge of everyone here and am too nervous to post under my regular name.  I hope you will not mind another budget and goals post.  I am comfortable with MM 101.  Now I need some MM 201 assistance.  I would love to have your input!   

Background: DH and I are very fortunate.  We have no debt other than our mortgage.  We purchased our home at the bottom of the market and should conservatively bank at least $50K when we sell it.  We could probably bank closer to $80K based on recent sales and comps in our neighborhood.  We are DINKS and live in a VHCOL area.  We have been aggressively saving (hoarding) cash for a while now with two main goals in mind.  I know we need to DO something with it and put it to work for us.  In full disclosure, we are pretty risk adverse.  I honestly have no clue where to start and would really love some advice based on our goals.

Goals: Within the next 18-24 months we would like to sell our house and buy a slightly larger house closer to the city - ideally with future rental income potential.  We will be looking for homes in the $750K range.  Like a recent poster, that is how much it will cost to buy a decent home in our VHCOL area.  Nothing fancy - just a 4 bedroom 2 bathroom home or townhouse under 2,000 square feet.  We would like to make a 20% DP (up to $150K) to avoid PMI.  We are currently in the process of "becoming agile" and have started to purge our house of things we do not need.  I would like to also make the necessary repairs/upgrades to get it ready to sell.  We are not opposed to selling it this year and have considered selling and moving into a rental until we find our next home.  DH would prefer this approach.  I think it is a waste of money but would be open to it.  Would you consider this? 

After selling/buying we would also like to start TTC.  We recognize we will need to factor in childcare expenses into our future budget.  I would also really like to have a night nurse for the first several months.  I hope this doesn't sound crazy.  I am the first to admit that I am terribly grumpy and have a hard time functioning when I do not get a full 8 hours of sleep.  We do not have any family nearby and I know we will need help if we want to continue to balance our careers and raise children.  My intent is to be 100% honest.  I hope this is not flammable.  
   
State of the union:
Step 1: Admitting you have a problem!  We have $160K in cash savings.  It is currently just sitting in a Capital One 360 account.  Specifically, DH has $45K and change.  I have $27K and change.  WE have $88K and change in our "joint" account.  Originally, we had our separate savings to start putting money away for car replacements when needed.  The Joint savings is a combination of e-fund, DP savings, and future child expenses savings.  We should probably invest this.  We can split it up in other ways as needed and would like to keep at least $20K in cash.

We bring home $10,243 per month after insurance, HSA contributions, and maxing our 401Ks.  I am bonus eligible but exclude bonuses from budget. We have lived on the budget below for the past year and have made a couple slight adjustments for this year based on actuals from last year.  The end result is the same amount of spending and savings - we just moved some money around to different buckets. 

Mortgage: $2609
Gas: $100
Electric: $100
Water: $75
Cable & internet: $95
Cell phones: $150 ($85 of this is subsidized by work but not included in our take home budget. Also, FWIW, we tested out a lower cost carrier but had a terrible experience and DH will not break up with our current provider and the unlimited data plan.)
Car insurance: $120
Groceries: $500
Date night/eating out: $200 (this shifts into groceries when we do a Whole30)
Car gas/maintenance: $300
House maintenance: $100
Dry cleaning: $80
Medical if needed: $25
Dog expenses: $200 (this includes doggy daycare, food, vet, etc.)
Gym memberships: $50 (I also pay $135 out of my fun money for my specific health club membership - I use both)
Gifts: $100
Fun Money DH: $433 ($100 per week)
Fun Money Me: $433
House cleaning: $216 (average over 12 months, $100 per visit every other week)
Travel: $200
Miscelaneous/Buffer: $150

Total Expenses: $6,236.55
Savings: $3,900 (we just increased this from $810/week to $900/week auto transfer)
Income - Expenses & Savings: $106 additional buffer 

I think this covers everything - let me know if I missed anything or if you have any questions! 

I am thankful we have been able to save money towards our goals.  Should we invest this savings? Where should we start?  Should we invest it all or only a portion of it? Hold off until we are ready to buy our next home?  What resources should I look into for advice on investing?  Ideally we would like to have the cash from savings for next DP and will use the profit from selling our current home to replenish our savings accounts.  After the DP, we want to keep at least another $20 - $30K in savings for our e-fund.  We are fully prepared to cut back on our fun money and eating out once we are in our next home and expect to make changes to afford childcare and a night nurse once we move into that phase of our lives.

Any and all advice is welcome.  Thank you all so much! 





 

[pamela]

If you want to make a move that soon I wouldn't invest your DP money. But if you honk you have enough to put down, I'd atart an I vest,net account and start adding to it going forward. Still put aside as needed for car replace,net, home repairs, etc.

[vanillacourage]

At this kind of money I think you need to meet with a financial advisor. They can walk you through different options and the risks associated with each. 

[gbcnaeforme]

Mar 4, 2015 21:47:54 GMT -5 vanillacourage said:

At this kind of money I think you need to meet with a financial advisor. They can walk you through different options and the risks associated with each. 

Thanks. I agree. This is partially why we are in the situation we are in now! DH wants to "do it on our own" but the "it" has just been hoarding.

[WinterWine]

Given that you want to buy within the next year, I would honestly keep all of that cash. I would plan to split that cash between a down payment and your e fund. I would take all future cash savings and invest it. H and I's Edmund is similar to yours in that we each have our own pot of money from pre- marriage (ours is invested though, but we have a higher risk tolerance). Do you have Roth IRAs? If not, I would use some of that money towards IRAs . Otherwise I think your budget looks good!

[krystee]

I would keep it cash since you plan to use it soon. Any reason you are not buying now? You have enough for a 20% downpayment (and you'd have $50-$80K left in the bank) and interest rates are really good right now.

[asoctoberfalls]

I don't think its hoarding since you're saving for a purpose (house down payment). I would not invest it if you're planning to buy within the next year or two.

Your budget looks good. Do you travel? I don't see any travel expenses. I also agree that a financial adviser is a good idea once you have extra cash to invest in non-real estate transactions. I would also look into child care costs in your area so you can plan for this as you decide how much house to buy.

[gt7301b]

If you think you are going to bank $80k from the sale of your home don't you really only need ~$70k for your new home purchase? I really don't see the need to have $150k in savings for a new home when you are selling your current home. In your case I'd probably put some of the money towards your existing mortgage.  If my option is having the money invested in a super low interest account or paying off, what I assume to be, a low interest mortgage I'd pick the latter.

You make enough money that I wouldn't sell my home and move into a rental, that seems like a big hassle to be agile.  Moving sucks, sell your home when you are ready to move.  You could afford two mortgages for a while if your current home doesn't sell.

If you don't need all $150k for a down payment I would invest at least $50k into the market.  I would look into back door Roth IRAs as a place to invest at least $11k of that money. (thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html) I'd put the rest into mutual funds with a provider like vanguard.

I like fool.com as a resource, but they tend to be more single stock focused.

Like the pps mentioned, now might be a good time to seek the help of a financial advisor. 

[compassrose]

Are you in a vhcol area where you'll need to have a offer accepted on a new place (bc it's so difficult) before you put yours on the market? Are you house hunting now? Things will heat up in March in most northern areas.
Are loans over 450 considered jumbo loans in your area? If you are putting down 150, that would still leave you 150 over (I know some vhcol areas have different rules).
What will your new mortgage payment & taxes be on your new place?

[lolo]

I'd buy now before the interest rates increase.

[gbcnaeforme]

Mar 5, 2015 1:29:30 GMT -5 WinterWine said:

Given that you want to buy within the next year, I would honestly keep all of that cash. I would plan to split that cash between a down payment and your e fund. I would take all future cash savings and invest it. H and I's Edmund is similar to yours in that we each have our own pot of money from pre- marriage (ours is invested though, but we have a higher risk tolerance). Do you have Roth IRAs? If not, I would use some of that money towards IRAs . Otherwise I think your budget looks good!

We do not have Roth IRAs.  We are no longer eligible.  I have asked DH about this before and he seems to think pre-tax savings in our 401Ks is enough and would rather have the rest of it more easily accessible.  Ideally, we would like to retire well before 59 1/2 if we can swing it.  

[y4m]

We had nearly this much cash in the bank (I know!) and we just moved it to a site called Betterment - nice middle spot between a financial advisor and actively managed fund and the very simple ETF strategy I had my other investments in. We are also moving other investment accounts over to the platform (the actual investments are generally Vanguard ETFs, but a diversified basket of them based on your goals). Hopefully this will be a good strategy for us. Worth checking out anyway...

[gbcnaeforme]

Mar 5, 2015 4:52:21 GMT -5 krystee said:

I would keep it cash since you plan to use it soon. Any reason you are not buying now? You have enough for a 20% downpayment (and you'd have $50-$80K left in the bank) and interest rates are really good right now.

We are too fiscally conservative.  We can only "count" the $160K now.  We do not (yet) have any proceeds from the sale of our current house.  I know that sounds silly.  I think we would be more comfortable with more cash in savings as a padding before shelling out $150K for a DP and going through both the home selling and home buying process.  You raise a good point about interest rates though.  

Our plan to become agile is really to get us in a position where we *could* be in a position to quickly buy or sell if we have a good opportunity to do so.  We are always looking at inventory in our desired neighborhoods, but haven't quite started the pre-qualification process, etc.  

[gbcnaeforme]

Mar 5, 2015 6:05:28 GMT -5 milsaroo said:

Any reason you're not buying now if you have the DP? Like others, I would not invest the money if you're planning on buying in case other expenses come up. Also, have you researched cost of night nurses in your area? I don't think it's flammable. If anything, I think it's awesome that you considered it/can afford it!

Also, do you know what your employer's maternity leave coverage is? I would want to start saving as a buffer for the shortage/loss of paycheck.

Because you have some large figures, I would definitely talk to a financial advisor to be able to efficiently meet your needs.

We are just trying to save a little more first.  I know it is silly. I feel like Linus with the security blanket, lol. 

I have researched the cost of a night nurse.  It appears to be $20-$30/hr in our are depending upon whether or not you hire an actual RN or a caretaker.  Yes, I am familiar with my employer's maternity leave coverage.  We definitely want to save an additional buffer for this but have not taken the time to calculate it out because we are likely still at least a year from even TTC.

[gbcnaeforme]

Mar 5, 2015 6:34:07 GMT -5 asoctoberfalls said:

I don't think its hoarding since you're saving for a purpose (house down payment). I would not invest it if you're planning to buy within the next year or two.

Your budget looks good. Do you travel? I don't see any travel expenses. I also agree that a financial adviser is a good idea once you have extra cash to invest in non-real estate transactions. I would also look into child care costs in your area so you can plan for this as you decide how much house to buy.

Yes, we love travel.  I have $200 per month included in our budget for travel.  We usually use a combination of points and our tax refund to cover additional travel expenses.  

Child care expenses vary.  Ultimately I think our house purchase may also play a deciding role in our childcare options.  DH is convinced we should get an au pair.  I am not sure I want someone living with us all the time.  Our neighbors had an au pair and had a really good experience.  My colleague has had a few au pairs and has had a very challenging experience.  We expect this cost to be roughly $2500/month.  It could very well change by the time we have children though.         

[gbcnaeforme]

Mar 5, 2015 7:05:19 GMT -5 gt7301b said:

If you think you are going to bank $80k from the sale of your home don't you really only need ~$70k for your new home purchase? I really don't see the need to have $150k in savings for a new home when you are selling your current home. In your case I'd probably put some of the money towards your existing mortgage.  If my option is having the money invested in a super low interest account or paying off, what I assume to be, a low interest mortgage I'd pick the latter.

You make enough money that I wouldn't sell my home and move into a rental, that seems like a big hassle to be agile.  Moving sucks, sell your home when you are ready to move.  You could afford two mortgages for a while if your current home doesn't sell.

If you don't need all $150k for a down payment I would invest at least $50k into the market.  I would look into back door Roth IRAs as a place to invest at least $11k of that money. (thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html) I'd put the rest into mutual funds with a provider like vanguard.

I like fool.com as a resource, but they tend to be more single stock focused.

Like the pps mentioned, now might be a good time to seek the help of a financial advisor. 

This is a very good (yet terrifying) point.  Paying for two mortgages terrifies me!  It is somewhat comforting to know we *could* afford it for a little while if absolutely necessary.  However, I would much prefer to not be in this situation!  Thank you for the link - this is helpful! 

[gbcnaeforme]

Mar 5, 2015 7:29:26 GMT -5 compassrose said:

Are you in a vhcol area where you'll need to have a offer accepted on a new place (bc it's so difficult) before you put yours on the market? Are you house hunting now? Things will heat up in March in most northern areas.
Are loans over 450 considered jumbo loans in your area? If you are putting down 150, that would still leave you 150 over (I know some vhcol areas have different rules).
What will your new mortgage payment & taxes be on your new place?

We have not quite figured out the timing.  It is difficult to buy around here - the market is extremely competitive.  I think we would prefer to sell first in order to not have the liability but may be open to buying before selling.  Clearly, we need to discuss this a bit more!

Our loan amount would not be considered a jumbo loan in our VHCOL area.  Based on the Redfin App, our estimated new mortgage including taxes could be up to $4100.  I would really prefer to keep it WELL under $4K.  I believe Redfin overestimates a bit. 

[gbcnaeforme]

Mar 5, 2015 12:56:37 GMT -5 y4m said:

We had nearly this much cash in the bank (I know!) and we just moved it to a site called Betterment - nice middle spot between a financial advisor and actively managed fund and the very simple ETF strategy I had my other investments in. We are also moving other investment accounts over to the platform (the actual investments are generally Vanguard ETFs, but a diversified basket of them based on your goals). Hopefully this will be a good strategy for us. Worth checking out anyway...

Thanks!  I recently read an article on Betterment.  I will definitely look into this a bit further.  DH has a couple Vanguard investments that he had before we were married.  I honestly have no idea what or how much he has invested.  I need to take an action to look into this a bit more as well.  

ETA: It was actually a Mr. MM article IIRC. 

[msmerymac]

You say you are maxing ($18k/year/each, plus employer contribution) 401ks. Is that more than 15%? If you want early retirement, you're going to need to eventually invest outside of retirement vehicles since you can't access that money without penalty before 59.5. And by outside of retirement, I mean straight out index funds, which you should probably meet with an adviser about.

While you technically have enough to put a DP on a new place, in a VHCOL market, it's probably going to be competitive, so I vote to stay in your house now, look for a new one next spring, then sell. Is your current home going to sell quickly? You'll have to talk to an agent about this more, but from your comments, I would avoid any kind of contingency (aside from the normal inspection and financing), like buying contingent on selling your current house. You might also want to either put down 25% or save extra money for moving expenses, decorating and possible updates to the new house. You say you want a house closer to the city, which I take it is more desirable. Is your current area desirable? Would your house be in good enough shape to sell pretty quickly?

Sooooo I'd want about $175k in cash before buying a new place, which seems really feasible. That gives you about $190k by this time next year, then subtract whatever you need for the updates you need to sell your current house. Depending on what your realtor says, I wouldn't really actively try to sell until you have an accepted offer on a new place. It looks like with a little trimming, you could swing two mortgages for a few months if you need to.

Then you'll net around $80k from the sale of your house, and bingo, baby and car fund.

I wouldn't move twice. Unless you can find housing that is substantially cheaper, your current payments are at least adding a little equity to your house.

[gbcnaeforme]

Mar 5, 2015 13:32:16 GMT -5 msmerymac said:

You say you are maxing ($18k/year/each, plus employer contribution) 401ks. Is that more than 15%? If you want early retirement, you're going to need to eventually invest outside of retirement vehicles since you can't access that money without penalty before 59.5. And by outside of retirement, I mean straight out index funds, which you should probably meet with an adviser about.

While you technically have enough to put a DP on a new place, in a VHCOL market, it's probably going to be competitive, so I vote to stay in your house now, look for a new one next spring, then sell. Is your current home going to sell quickly? You'll have to talk to an agent about this more, but from your comments, I would avoid any kind of contingency (aside from the normal inspection and financing), like buying contingent on selling your current house. You might also want to either put down 25% or save extra money for moving expenses, decorating and possible updates to the new house. You say you want a house closer to the city, which I take it is more desirable. Is your current area desirable? Would your house be in good enough shape to sell pretty quickly?

Sooooo I'd want about $175k in cash before buying a new place, which seems really feasible. That gives you about $190k by this time next year, then subtract whatever you need for the updates you need to sell your current house. Depending on what your realtor says, I wouldn't really actively try to sell until you have an accepted offer on a new place. It looks like with a little trimming, you could swing two mortgages for a few months if you need to.

Then you'll net around $80k from the sale of your house, and bingo, baby and car fund.

I wouldn't move twice. Unless you can find housing that is substantially cheaper, your current payments are at least adding a little equity to your house.

Yes, we definitely need to start investing outside traditional retirement vehicles.  DH is much more knowledgeable about index funds and investing than I am.  I need to do some serious research.  We both need to put this into practice.  Luckily, time is on our side.  I still have 30+ years until reaching 59.5.  DH is older (and has more saved).  He wants to work forever.  I do not.

Our current home is in a desirable area.  It is only 10 miles outside the city - in a desirable area that has seen tremendous growth.  We have made several upgrades and just need to do some cosmetic touch ups like painting, etc.  

Thank you for the tips and thoughtful questions. Your math aligns with my plan.  We do not NEED to move soon, just want to move.  I hope we can stay for another year to continue saving and still be in a good position after our next DP.