Presenting our fifth money snapshot, this time with a government worker in the Northeast! She notes: “Our income has grown rapidly in the last several years — in 2011 we made $32,000 (together), in 2014 we made $135,000, and in 2018 we will make approximately $235,000. Because of the timing of my husband’s schooling, we were in a position of playing catch-up on our retirement accounts, specifically his accounts, but we look to grow our overall financial portfolio in the coming years.”
By way of background: We got a few requests from readers to launch our own “money diary” series, so we’ve asked willing readers to fill out a form with lots of details about debt, spending, saving and more! If you’d like to fill out the form and be considered for a future personal money snapshot, please click here to submit your response! You can see a PDF of the questions if you want to review them ahead of time. See others in the Personal Money Snapshot series here.
Please remember that this is is a real person who has feelings and isn’t gaining anything from this, unlike your usual friendly (soul-deadened, thick-skinned, cold-hearted, money-grubbing) blogger — so please be kind with any comments. Thank you! — Kat
Location: MCOL medium-sized city in the Northeast
Family members: Husband, 37 (engineer with extensive work travel), and a 3-year-old who recently told me they are planning on being a dinosaur when they grow up.
Household income: $235,000
Net worth: Outside of retirement accounts, our net worth is approximately $100,000. My husband has approximately $250,000 in retirement accounts plus a small pension account, while I have a defined benefit pension.
Net worth when started working: I started working at 14, used scholarships and worked through college and grad school, and graduated at 23 with approximately $25,000 in debt (not bad for no parental support!). My husband had been in the military and went to school utilizing the GI Bill, graduating at 30 with approximately $20,000 in debt. While he was in school, my career was in a holding pattern, but I was quickly able to build my career once he graduated and we relocated.
How much debt do you have? $5,000 in student loan debt that will be paid at the end of the year , $35,000 car note with a low interest rate, $300,000 left on our mortgage.
Living situation: Own — mortgage + taxes + insurance is $2,200/month.
How much do/did you spend for childcare and/or education? $1,000/month
Is there anything else we should know about you?
Our income has grown rapidly in the last several years — in 2011 we made $32,000 (together), in 2014 we made $135,000, and in 2018 we will make approximately $235,000. Because of the timing of my husband’s schooling, we were in a position of playing catch-up on our retirement accounts, specifically his accounts, but we look to grow our overall financial portfolio in the coming years.
What does your debt picture look like?
We are down to minimal student loans (subsidized only, we utilized the snowball method of paying off our highest interest loans first). We do not carry credit card debt as a habit, but do have a car note which we were able to get at a lower interest rate than the average return on our investments for the past few years. Our mortgage interest rate is also very low; however, it is psychologically important to my husband that we pay that off sooner rather than later.
We asked Clementine how she and her husband handle differing opinions on finances, such as the mortgage question:
My husband and I are both very rational people — we joke that because we’re both Libras, we just talk and talk an issue until we reach balance. We also do a very good job of picking our battles and understanding the other person’s needs.
How much money are you spending each month to pay down debt?
We have prioritized student loan debt and have paid (on average) an additional $1,000/month for the last two years to eliminate it. Our next priority is paying off our car note; however, the interest rate is low enough where it made more sense to invest those dollars elsewhere and take out the loan.
How did you pay for school?
I didn’t go to my “dream school.” Instead, I took a five-year, full-tuition scholarship at a well regarded state school. I worked as an RA during college to get a free room and a monthly paycheck and worked summers and retail jobs to pay my car insurance and for my meal plan. That being said, I still walked away with $25,000 in student loan debt, largely owing to the few semesters I chose not to (or was unable to) RA.
Have you paid off any major debt?
We are so close to paying off our student loan debt I can taste it! I am so tempted to just take money from our emergency fund to pay it off.
We have a fixed, 30-year mortgage that was a VA mortgage. We were offered the option of reducing our interest rate without paying any closing costs or extending our term and took that option, so our interest rate is 3.5%. We could have been approved for more, but were able to buy a home in our ideal neighborhood for what we felt was a reasonable monthly payment. We make biweekly payments, meaning that we make an extra principal payment annually. It is important to my husband that we pay off our mortgage ASAP; however, I acknowledge that from a financial standpoint it doesn’t make sense.
Have you ever done anything noteworthy to avoid or lessen debt?
We have worked and worked and worked some more. We replaced a 20-year-old car only when it began to have safety/reliability issues and choose experiences and time over material items.
Savings, Investments & Retirement
How much do you save for retirement?
Annually (outside of pensions), we aim for $35,000; however, the majority of our retirement accounts are pensions.
How much money do you allocate to other tax-savvy investments/accounts?
$1,200 annually (currently) to 529, $5,000 to our Dependent Care Advantage Account (for daycare).
How much do you save outside of retirement accounts?
That amount varies based on our ongoing expenses. We do not currently have significant automatic transfers going on; however, we do have a combination of money market accounts (minimum 24 hours to access funds but high rate of return) and linked savings accounts.
Talk to us about investments.
We have a financial planner as well as utilize index funds. We have chosen to diversify our investments at this time so as to not “put all our eggs in one basket.”
Do you have an end goal for saving or are you just saving for a rainy day?
Our financial goal is that if either one of us chooses to leave our jobs and be either a stay-at-home parent or take a major pay cut, that option is on the table.
Here’s what Clementine said when we asked her to elaborate on this goal:
I don’t think it’s likely; however, it’s our security blanket. My husband would be the better stay-at-home parent, and his job is also the job that is harder on our lifestyle (extensive and extended work travel). Ultimately though, he loves what he does and I’ve accepted that as my “price of admission.”
What’s the #1 thing you’re doing to save money, limit spending, or live frugally?
Both parents are still working rather than taking one parent out of the workforce.
When did you start saving seriously? How has your savings strategy changed over the years?
We started saving seriously in 2012, then paid for a wedding (taking out no debt but using those savings), then saved for a house (purchased in 2014), then had some income loss related to maternity leave in 2015, and really started to seriously rebuild our savings accounts in 2016.
Have you ever made a big money move or investment with savings in mind?
We moved our “orphaned” 401K accounts into an employer-subsidized deferred compensation plan, ensuring that we were actively managing all accounts.
How much do you have in cash that’s available today?
How much do you have in cash that’s available in a week?
How much is in your “emergency fund,” and where do you keep it?
$80,000 (included above), a combination of checking/savings/money market accounts. I did not include any accounts I would incur a penalty for withdrawing (e.g., retirement).
How much do you have in retirement savings?
I have a defined benefit pension plan plus $20,000 in an additional retirement account. My pension will pay me 60% of my three highest years of pay plus health benefits. My husband has a small pension (expected to pay approximately $1,000/month) plus currently $250,000 in retirement savings.
How much do you have in long-term investments and savings (CDs, index funds, stocks) that are not behind a retirement wall?
If property values (home, car) are included in your net worth, how much are those worth?
Car is worth $10,000 more than is owed (included), home is worth approximately $100,000 more than is owed. Note that I may not have included that full amount in our net worth.
How much do you spend on the following categories on a monthly basis?
Restaurants, bars, takeout, and delivery: $240
Clothing and accessories: $200
Rent/living expenses: $4,000
Kid-related expenses: $1,500
Health care — premiums and other costs: $150 in monthly premiums, $1,000 outside of that, but has varied drastically in prior years.
What’s your spending range for these things? What’s your average?
Vacations – Range: $20–$12,000
Vacations – Average: $3,000
Individual items of clothing – Range: $20–$80
Individual items of clothing – Average: tops $30, pants $40, dresses $60
Apartment or house – Range: $400–$2,200
Apartment or house – Current main residence: $2,200 monthly mortgage (house cost $355,000)
Car or other vehicle – Range: $0–$50,000
Car or other vehicle – Last purchase / current main vehicle: $50,000. It was a splurge but chosen for size and safety.
Fill in the blank on this question: I could save _____ if I stopped ______, but I don’t because _______.
We could save a drastically large sum of money if we cut out vacations and several items that are “luxury’ items” (e.g., house cleaner, organic food, etc.); however, I actively choose not to because I have known multiple people in my life who never spent, planning on having a fabulous retirement, and then died suddenly before they got to enjoy that retirement.
If you’re married: When was your wedding, how much did it cost (total), and how much did YOU pay?
2012, $15,000, and we paid $14,000 of that.
Tell us about your wedding!
It was great! We focused on what mattered to us and had a fun but elegant party.
Have any large medical expenses for yourself or others played a role in your financial picture?
Yes. We lost a significant amount of income related to pregnancy-related complications and then had approximately $13,000 in out-of-pocket costs on top of that lost income.
Are there any other large expenses in your life, now or previously?
We own an older home on which all repairs seem to cost $8,000.
At any point in your life to date, has inheritance played a role in your money situation?
I got $10,000 from a grandparent, which I used to pay for some living expenses during graduate school.
Do you have a general money strategy?
Work hard. Make smart choices. Buy less stuff.
What are your favorite resources for personal finance?
What advice would you give your younger self about personal finance?
Don’t stress so much about money.
Photo credit: icons via Stencil.
anon a mouse
Super interesting! I appreciate the discussion of pensions. I also have a DBP and it’s hard to plan well for saving outside the pension, when I expect to be in my job long enough that I could replace close to 50% of my salary and get health benefits. Do you monitor the health of the pension fund? And how does your pension factor into the decision to keep working, since if you leave the workforce you will stop accruing the credits?
Yes, I do monitor the health of my pension. We definitely save with an eye to the fact that things can change in the future; however, my pension is relatively healthy, largely owing to the fact that my employer made big changes that made the retirement plan less ‘generous’ in recent years.
Luckily, I had signed up for the pension when I was still a college intern (thank you InternBoss who suggested this to not-legally-old-enough-to-drink me!) and am one of the last people to get that sweet ‘legacy’ pension.
It does factor into my decisions, particularly in my decision to stay within the public sector versus taking some interesting private sector opportunities. Like all things, it’s part of the overall financial equation.
Hi Clementine! I miss your posts here. Glad to hear your family is doing well.
That’s so sweet, thank you! I hope everybody here is doing wonderfully.
I got a different job where I ACTUALLY only work 40 hours/week… I actually cut out visits to thissite to make sure I was fully focusing in my new gig. Also, having 20 hours less a week to work really makes you bump up your productivity level.
Anyone have advice on calculating the value of a pension vs a regular retirement account?
I’m 9 years into a job and have the option of “buying back” that time in a pension plan. I will need 10 total years + 2 years of contributions and I’m confident that I will be here for another 2 years but most likely much more. If I do this though, I will have very little room in my budget to save for retirement outside my pension contributions and my existing savings will have a large hit. I’m in my mid-30s and while I plan to stay in the same pension system for the rest of my career, I can’t be certain that that will happen. I’m having trouble figuring out the math for whether or not the pension is a good deal for me compared to continuing to save or invest on my own. I’ve gone through the math on what my pension might look like and what my retirement savings might look like, but there are SO MANY variables – like future income, years of service in the pension system, etc, that I’m having a lot of trouble with a decision. Does anyone have advice?
I went through this analysis and basically, the pension plans set the buyback cost so that the pension benefit is actuarily identical to the amount you pay for it, if that makes sense. I ended up not buying back and investing elsewhere, but YMMV.
Google EBRI which has a recent study comparing the value of a DBP vs self-managed savings. Given that most DBP have a contribution of less than 10% os salary, it’s not necessarily and either/or. But with a DBP it is income that you don’t have to worry about outliving and your payment is not (directly) tied to market returns so it’s a great way to augment your own efforts.
I will also say (age 54, recently returned to govt sector and will retire in 6 years), the closer you get the clearer the picture becomes. But unless you made yourself miserable with extreme frugality or have the misfortune of early mortality, you will never get to age 50 and be sorry you have “so much money”.
I do not have a pension plan, Frank says, but I said I have a 401K, so I think he is wrong. If he is right, what is the difference?
A pension plan is defined benefit — you get a specified amount of money every month, usually some percentage of your salary. The plan is funded entirely by the company as a reward for loyalty.
A 401(k) and similar workplace retirement programs are defined contribution — you put in some money every paycheck (+/- employer match) which is invested in the stock market under your direction or in a generic target date fund. Then at retirement, you have a bucket of money to draw on. If the market tanks just before you retire, though, you are out of luck.
Pension plans are rare these days. Most companies have moved to a 401(k) or 403(b) retirement program, which places most of the responsibility and risk on the worker.
This is such a brilliant article, thank you for sharing so personally! I look forward to reading more of these!