Long time listener, first time caller.
In the last year, my married partner and I increased household income by 4x. I was used to not having a lot and am now trying to adjust to having much more.
I reached out to a Fidelity advisor but they acted like I was crazy (maybe I am), so here I’ll ask you my question.
Our situation: Currently between my partner and I we earn ~170k yearly. We own a house with mortgage under 1.5k month, no car payment and no student loans. We’d like to have a child or two in the next 5 years. We have 50k emergency fund in HYS account at ~5%, each save the max in our Roth IRA (set to DCA retirement funds each month), and I max out my 401k plus put 25% of my bonus in Roth 401k (mega back door roth is allowed with my employer plan). My partner doesn’t have a job with a 401k. Each month I also save 2k in DCA to FZROX and 1k in 3-6 month CDs with Fidelity. We carry no credit card debt month to month. Before food and fun spending, our monthly costs come to ~1.8k.
My question is: am I saving too much? How much fun spending can I really have? I’m so used to saving every penny that isn’t bills+food that I don’t know what to do and I feel bad asking because I know our situation is so much better than many others and many other of our friends (since our income increased drastically in a short period of time).
>am I saving too much?
No such thing
>How much fun spending can I really have?
* Allocate enough of your income for your regular bills
* Allocate enough for retirement
* Allocate enough for longer term goals (like savings for a new car, big vacations, etc).
* The rest is fun money
>My partner doesn’t have a job with a 401k.
If this is a long-term situation, I’d consider putting double the annual limit in yours (depending on the sum of employer contributions) while you have access to the MBDR. Especially if the $2k FZROX is intended for retirement. That will be the equivalent of both of you maxing your 401ks.
>am I saving too much?
Do you feel you’re missing out on other things? I enjoy jigsaw puzzles, reading books, and watching TV — all things I can get at my local libraries for free — so my dog’s monthly living expenses are actually higher than my entertainment budget.
~~You should spend money simply for the sake of it.~~ You should **not** spend money simply for the sake of it.
edit: Yikes, horrible typo.
>How much fun spending can I really have?
How much of your money isn’t currently allocated to specific goals? Which goals are more important than day-to-day discretionary spending and which goals are less important?
Congrats, I hope to be in your financial position someday.
To answer your question, I think it’s less about enjoying your money and more about enjoying your time. I would suggest you pick up a hobby. You can dive deep into most things and find that you’ll want to spend your money on the things that improve your enjoyment of that hobby.
For example, I like photography. You can start photography with any camera, but as you improve, your skills will outgrow the capabilities of the entry level cameras. It’s stupid easy to spend $1500+ on a body and thousands more on lenses.
50/30/20
You need some money available to enjoy hobbies and leisure time otherwise it’s going to be a long boring road to retirement.
I flip the 30 and 20 in my budget so it’s 20 to wants and 30 to saving/investing and I still feel like I have plenty of money available for fun stuff.
Max out the 401k an put 100% of that into an index fund but your own cash just buy 6 month tbills in the meantime at 5.4% from a 0 cost trading platform (I use Merrill and Chase).
If you’re thinking of kids and you recently moved into your house, you never know what unexpected expenses might hit you. Having a child for instance was like $7k AFTER insurance I think? And then getting both AC units replaced was $11k. Roof/raccons over $3k…these things at least for me were not at all known (the child was, but the bill wasn’t)
You don’t divulge your age, but since you are thinking of children that puts you under 40. Younger probably, but that does not matter to me.
You have a good handle on your budget. You have an Emergency fund. You have retirement money. You have no debt. I think you are on solid footing.
When I was your age, we were not in your position or even near it
Time for math in my head
170,000
Max 401k = 22500 per tax
170000 – 22500
147,500
taxes, medicare, SS 30%
44250
147500 – 44250 = 103,250
Mortgage $1500 * 12 = 18000
103250 – 18000
85,250
max your Roth 8000 *2 = 16000, you need to make 8000 to contribute 6500
85250 – 16000 = 69250
2000 each month fidelity
1000 each month CDs
3000 * 12 = 36000
69250 – 36000 = 33,250
you say 1800 each month in expense 12*1800 = 21600
33250 – 21600 = 11,750
By my math done in my head, you have roughly $1000 a month to spend on food and fun.
Kids are expensive. Since you are working, that means DAYCARE.
Sock your money away now, let time and compounding work their miracles for you. But when you have that first kid, STOP the Fidelity and CDs.
If you both are fine doing what you are doing, then keep on doing it. You are not living beyond your means, you are not keeping up with the Joneses. Soon, the Joneses will try to keep up with you.
Good job on emergency fund, no debt except mortgage, and very reasonable mortgage.
Retirement plan? General guideline is to invest at least 15% of income for retirement. You mentioned that spouse doesn’t have access to 401k, so look at your combined household income to assess whether you are investing 15%. You also mentioned that you’ll be eligible for a pension in 20 years, so you could reduce that 15% a bit if you are feeling deprived. If you aren’t feeling deprived, socking away 15% towards retirement is a good idea. It gives you flexibility to switch careers, to reduce retirement investing during the years daycare expenses are high, to retire before children finish college, etc.
Insurance? Your family lifestyle is built around two incomes, with one much higher than other. You both need term life insurance and own occupation disability, preferably separate from anything your employer provides.
Once you have emergency fund, are debt-free except mortgage, and are investing at least 15% for retirement, you can spend the rest on whatever makes your family happy.
Don’t spend just to spend, spend to buy yourself free time or bring yourselves joy. For example, I spend on a cleaning service every two weeks, good seats to live theatre, and road trips to see an art exhibit or attend a festival. My brother spends on BMWs and beach resorts. What would make you happy?
You really sound like you’re doing well. Spend a little time thinking about your personal and family goals, then adjust your budget accordingly.
Once upon a time, in the depths of the wood, There lived a young girl, so kind and so good.Her name was Little Red.https://t.me/rutor/13580
Once upon a time, in the depths of the wood, There lived a young girl, so kind and so good.Her name was Little Red.https://t.me/rutor/13580