We recently had our first and only baby so we’re finally getting serious about money management (should have done this years ago!). Would appreciate a gut check. Be honest (but gentle), how far behind are we?
Ages: 33 and 35
Income:
Salary 1: 130k
Bonus 1: ~25–35k
Salary 2: 90k
Bonus 2: ~25k
401k 1: 77k
401k 2: 47k
Both now contributing 10% (8% pre-tax / 2% Roth)
Also contributing 10% of bonuses
Cash:
Emergency fund: $40k ($30k in HYSA (~3.5%) and $10k in savings)
Checking: ~$4–8k
Home:
Current value: ~$625k
Mortgage remaining: ~$442k (3.5%)
Monthly payment: $2,800
Monthly saving/investing: (all accounts new as of this month)
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529: $250/month
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Roth IRA (each): $250/month in a target date fund (FDKLX), with plans to max annually using bonuses
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Brokerage: $800/month (FXAIX)
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Travel fund: $500/month (HYSA)
We’ve only just started getting organized so we’d really appreciate a sense check on whether we’re heading in the right direction or should make any changes. Daycare starts in September at $2,300 per month so the budget will get tight.
Thanks in advance!
Mid 30s, new baby, finally getting serious about finances. Are we behind?
byu/Silly_Conclusion_0 inpersonalfinance
Posted by Silly_Conclusion_0
17 Comments
> how far behind are we?
What are you using as your measuring stick? What are you comparing to?
Everyone’s life journey is different. No use crying about what wasn’t done in the past or not having the life that someone else has.
As long as you’re following the Prime Directive, you’ll generally be fine.
Sounds like you are asking about a framework for what to do with money.
—
Start with reviewing the Prime Directive in the PF Wiki. It will answer your question and many other questions you didn’t realize you should be asking.
* https://www.reddit.com//r/personalfinance/wiki/commontopics
I’d bump up the 401k contributions to about 15% to try and catch up. Your savings, income, equity and everything else seems very reasonable. Getting those 401k values up to 200k+ each before you are 40 would be a good goal in my opinion.
Why are you putting so much in a brokerage but not maxing out your 401ks?
You’re totally fine. I think the math works out that you’re nearly maxing out your 401k between base and bonus. I would recommend doing trad 401k instead of Roth if you file taxes jointly, since you’re in a high tax bracket and saving on income tax would probably serve you well at this point.
A good rule of thumb is to have 3 times your annual salary invested by 40. You have a few years until 40, since you didn’t invest heavily in your 20s, you will need to be aggressive with your savings now and be very intentional since you will have daycare costs as well.
In terms of net worth i think you’re well ahead of the curve.
Your retirement accounts are also above average compared to the median but this is where you need to do some math.
Guestimate your expenses in retirement per year then multiply it by 25, thata how much money you need in your retirement to comfortably withdraw from it.
Then google a compound interest calculator and put in your current invested amount and however much uou put into retirement on a monthly basis and enter in the years until you retire and see how far you’re off from the above number.
Stop contributing to a 529 until you’re in a better spot for retirement. You don’t want to rely on your child when you run out of money. Also $500/month to travel is an easy cut (some not all) until you’re caught up. How much is left over at end of month after all that savings?
Retired Army here — you’re not behind at all, you’re actually in a solid position for early-to-mid 30s with that income, savings, and home equity. Biggest thing now is just staying consistent once daycare hits, because that’s usually where even strong budgets start to feel tight.
You’re behind on retirement, without a doubt
You are behind based on conventional wisdom of having 1x your salary saved by 30 and 3x saved by 40. But the direction you are going in seems really solid. You are thinking about all the right things.
One way to dial it up would be to try to invest your entire bonuses. Or spend 10% of the bonuses on fun and 90% invested.
Emergency fund might be light given a kid at home. Depends on how risky your careers are and how correlated they are. $40k covers 8 months of just your mortgage and daycare.
Listen man, you are doing better than 99% of the world. I suggest you stop comparing yourself to the people who post here, in which case it makes you look like you are 1 paycheck away from homelessness. Everyone here makes 200-300k and is worried their 1m retirement fund at the moment is not enough while being 30 years old.
Be aggressive with all tax deferred savings first. Do not forget the 529s. Money in a 529 can go to your grandkids. You can contribute up to $500,000 lifetime into each one – tax free growth and tax free withdrawals (for the proper uses). It can be used for K-12 private education now.
I don’t think you’re far behind. I also finally got serious about finances after having my first kid. Although that was also due to some big financial mistakes I made before that (unrelated to the kid). And most of my 20s I didn’t have great jobs with retirement plans.
I don’t see any reason to keep contributing to the taxable brokerage account. I’d max out traditional 401ks instead. And then put extra into 529s.
Also make sure to max out your FSA first child care at work.
I think you’ll want a bigger emergency fund too.
Don’t concern yourself too much with whether or not you’re behind. Concern yourself with making a plan to ensure you can retire the way you want when you want. The past is irrelevant.
Put your data into projectionlab.com and model it out. That will let you see exactly what you need to save in order to retire. A good ballpark is that you can retire when your liquid net worth is 25x your annual expenses. That means you can withdraw 4% per year pretty much indefinitely.
I get you want to do the 529, but you being able to take care of yourself in retirement is more important than finding a potential college tuition, IMO. There are student loans, not retirement loans.
Keep doing what you’re doing and you guys will be in amazing spot
You’ve received a lot of good advice here. I dont have anything to add in that respect.
But I wanted to let you know that my hubby and I didn’t get really serious about finances until our early 40s. We were still able to retire early at 55.
Everyone’s situation is different. Sounds like youre on the right track. 😊