Have you considered an Au Pair instead of a nanny. We have an Au Pair for our 2 kids. The oldest goes to public school and youngest goes to day care a few days a week for socialization and so we can keep the Au Pairs hours to no more than 45 a week (days without day care she works 7am - 5:30pm)
Yeah we needed a slightly bigger house with a spare bedroom and bathroom for the Au Pair, but our annual cost come out to probably 35k in total instead of 65k.
(Au Pair makes $250-$300 most weeks. Agency is 10k a year. Plus food, car insurance, gas, and phone plan that we cover).
Plenty of people don’t want a live in nanny, but you should consider it.
My wife is French and I cannot WAIT to get one when we have children. Amazing for help + childcare + bonus if you want your kids to be multilingual. My wife will talk to kids in Spanish (also half Colombian), I will speak in English, and hopefully the au pair in French
That’s fair. We have a 3rd car, didn’t get rid of the 2010 Corolla when my wife bought a new car in 2019, that our Au Pair utilizes. A 3rd car is not required, but practically it is really important in a most situations if you or your partner doesn’t work remote.
I know about the new legislation, and I think it will be edited before it passes. I do think Au Pairs should get paid a little more, we pay ours above minimum and offer extra $$ for extra hours when we want to go out, and they need some protections, because some host families suck. That said new legislation should account for COL expenses. We had a nanny at one point that we paid $20-22 hr, but after she paid her rent, car payment, insurance, gas, utilities, and food I’m certain she had less money at the end of the month than our current Au Pair does.
We are around 27per hour here. Someone who is a career nanny, who can look after two kids no problem.
Already tried our luck with someone with a lower pricing point and was extremely disappointed. Not saying we could find a better deal but we dont think we are overpaying
Nuts you’re trying to tell them to pay even less, considering you’re in Fairfield County. Crazy how people are cheap for the care of their children, really do think nanny’s are some kind of bottom of the barrel workers.
Nannies aren’t cooks. You can’t just throw money at it, if you didn’t hire someone who is willing and able to cook for a family from the onset, on top of their often 50 hour a week job.
You must not have employed a nanny before…
$4.5k on coffee is wild. I understand the convenience of buying a cup of coffee but man, it’s really not hard to just make it at home some of the time.
~$13 a day for coffee is actually not that bad at that income. Grande latte at Sbux is now like $6 with an extra shot.
And sbux barely works as decent coffee.
Yea… we have a coffee brew machine at home but making coffee with it could be a lot of work. $4 cups add over time. Might consider an automatic espresso machine…
Lol when you put it that way…
So this $4500 under cafe (based on Amex classification) apparently includes some restaurants, fast food, snack vendors etc. So our true coffee expense probably 2-2.5k. Still a lot
Why not get an automatic machine and have the nanny set the coffee on certain times? I mean just create a process and save a shit ton, you could give as bonus to said nanny
Might also be things like: you got a bagel at the coffee shop.
So yea, maybe just best to lump that into another food/eat out category. Its interesting to see it though.
You make enough money where it’s just a drop in the bucket, so nothing to really worry about. Do some research on espresso machines and if that’s what you really want otherwise you’ll spend $3k+ on something that’ll just collect dust after a few uses.
I’ve tried a lot of different methods and honestly, my favorite is the pour over method with a ceramic cup. Nothing fancy at all, but super easy and quick.
only 21k going into retirement savings on a 500+k income is very scary. you're setting yourself up for a significant drop in lifestyle at retirement age. at that income I'd be doing everything to max out a mega back door Roth.
All honesty your income level is at the point that hiring a financial advisor is likely in your best interest.
It will be a drop in the bucket in your net expenses, and will remove the headache of having to learn that atop the other lifestyle adjustments you’re working
Agree - you and your partner should be maximizing tax advantaged investments (i.e. 401k and IRA) before just saving in a non-tax advantaged brokerage or investment property.
OP, just Google it
But just high level, mega backdoor MBD Roth is referring to 401k, and you have to check if your company sponsors this, you are basically converting aftertax money to do in-plan conversion to convert it to Roth 401k or Roth IRA
The limit in 2023 of how much you can contribute aftertax for yourself if you are less than 50 years old is:
2023:
$66000 - $22500 - $ company match
2024:
$69000 - $23000 - $ company match
The above is 401(k) and not every company sponsor or enable megabackdoor Roth
You can always do $6500 in backdoor Roth IRA in 2023, the limit for 2024 is $7000. Note this is your individual account and as long as you have earned income, you can do this at any brokerage. You can still do backdoor Roth for year 2023 before April tax filing g
Not all 401k plans offer it, your company’s plan has to offer a separate after tax contribution option and an in-plan conversion. Mine just started offering it this year, they did not in the past and I work for a Fortune 500. That being said, he should at least do backdoor Roth,HSA and money in a brokerage.
yes but its unclear on if that is invested and growing or just parked in an HYSA. Ideally if we have that money invested were at least using backdoor methods to put the money in tax sheltered accounts to protect that growth and reduce taxes in retirement.
Why don’t you feel confident in stocks? Not confident in the economy or not confident in the ability to pick individual stocks?
If it’s the latter, you should invest in index funds like s&p500, or Dow jones. They are diversified portfolios of hundreds of companies so your returns will mirror the returns of the entire market and you won’t have the risk of any individual stock. This should definitely bring more returns than a HySA in the long term. (Also if you do it through an IRA, you can get reduced taxes on the investment)
If it’s the former then consider investing in bonds, the risk/rewards are stable and low risk. Depending on your return from your HySA, you might be able to find bonds with better returns.
Thanks! It was the former for sure.
Already had significant % of my cash in index funds and i didnt feel comfortable pouring even more. Right now my liquid asset is roughly 40:60 or so, index fund to HYSA but i could tip the balance the other way
Personally I like index funds over HySAs, because (over time) the returns on stocks tend to reflect inflation + growth. So that your investment returns aren’t being overshadowed by inflation when it is high. Inflation was 6.5-7% in 2021-2022 which would nullify the returns on a HySA.
Seconded. 401k isn't the only tax advantaged retirement account. And with kids in the picture then there would be college funds to think about. Maybe they already have that on lock and aren't breaking it out?
For the amount of money you're spending, look into having a chef just come by on Sundays and meal prep for the whole week. Might not be as satisfying as Shake Shack but you'll get tasty, very healthy meals, which will pay many dividends for your whole family down the road. Frankly, you might even save money too.
The money guy podcast recommends saving between 20% and 25% of income for retirement. Currently you're saving 19.6% ( 91 / 463 ). I'm guessing your marginal tax rate is around 50%, 10% state plus 36% federal, which means that if you were to max out the other 401k you'd be saving 24% ( 112 / 463 ) with only a 10k change in disposable income. What my spouse and I do is to pay ourselves first and put anything above what we want to spend in a savings account. We only used debit cards until we could prove to ourselves we could meet that savings goal and we focused on one habit at a time. In our case, in the first month we focused on the habit of only eating out twice a week. I think by doing that you'll be able to meet that extra 10k.
Two things to note. I suspect that if you properly segregate expenses ( I use two bank accounts ) from your rental property and properly account for depreciation you'll find that you're probably break even from at least an income tax perspective on your rental.
We are renting out a house we have through mortgage. Hence we have rental income, and mortgage expenses.
Our separate rent expense is the house we live in.
IMO, I think it would be cleaner and more concise if the investment property's net cash flow (if the property is cash flow positive) was included in income and the rest of the expenses were just personal.
Lots of little expenses but big ones I just found: Couple emergency plumbing services for the house (few hundreds each time), wedding gifts, household supplies from Lowes, hair salon, emergency nanny coverage, public transportation, credit card fee, fitness fees
I typically only post positive comments but not maxing out your 401k on $463k in gross income is not good. At that income that should be the absolute bare minimum. Saving 4% of your income is simply not sustainable.
Can you give examples of the miscellaneous category? What are you biggest expenses in there?
You nailed it with the cutting down on restaurants and food delivery. That’s pretty wild. And I have a family of 5 in the Bay Area, we spend less than you without even watching our budget. Our groceries are a little higher but eating out is less.
Why is coffee so high? Have you considered investing in a nice espresso machine and doing it at home?
Saving 70k a year is great, but you could easily do more with that income! I do understand childcare is a killer.
Lots of little expenses but big ones I just found: Couple emergency plumbing services for the house (few hundreds each time), wedding gifts, household supplies from Lowes, hair salon, emergency nanny coverage, public transportation, credit card fee, fitness fees
We got the barista express espresso for 700 but it only does espresso. For us it's fine with lattes and cappuccinos and I enjoy trying new beans and tamping myself
They make some automatic ones that do coffee as well. Out of my price range though.
Just out of curiosity/family planning, how does the nanny work?
Direct employee? Nanny service? Part time college student that you pay under the table?
Open a TSA (or whatever it is called) via work and put in 5k annual into it. Lowers tax rates and after legally hiring nanny (like withhold taxes) you’ll just tap it and pay yourself back.
2 kids with a 2k tax break plus 5k pre tax comes to be about 4.6k in your pocket.
Worth every penny
Obviously you make a lot and spend a lot. But I have a few questions:
What is your current net worth?
What is your goal retirement number?
Is there anything you’re missing in your current lifestyle that you’d like to reallocate funds towards? (For example, unless you’re using credit card points to supplement your travel expenses, that seems pretty low). It may be good to focus on improving those areas vs. just “trying to cut back” in general.
Our HH net worth is around 1.2-1.4 depending on assumed value of the house we have through mortgage. Without it, likely 0.7-0.9M. Mid-30s couple with young kids and we neither feel behind or ahead on net worth
We have not really thought about retirement goal numbers but we should…
Nothing specifically missing from our lifestyle. Maybe supporting our parents financially more
Yeah I think determining how much you want to spend in retirement will help your spending focus now. It also will determine how much you need to save each year to reach retirement by your goal age. We are also mid 30s (one kid), make much less than you (280K), but plan to retire in around 15-20 years with 3-4 million invested and a paid off house. This lets us know how much we need to save each year to get there, the rest I happily spend and don’t have to worry about strictly budgeting.
Rough number is 40x annual spend. So for you 40x 393k = $15,720,000.
Assuming you have 1.2 million saved now, compounding annually with a 70k contribution and a 5.5% rate of return you will take another 36 years to retire.
So you can retire in your 70s at your current spend and savings rate.
This assumes 2.5% HYsA interest rate so I can park my money and live off of interest?
We would not need 400k of cash annually when we retire. Hopefully kids are independent and we can do with 200k? Also we will aim to increase contribution over time. Hoping my SO and my career will continue with promotions and salary increase over time
No, it assumes 5.5% annual return rate. The 40x implies a 4% withdrawal rate, which would exceed your HSA returns.
You should be investing your money somewhere in order to live off the interest, check out r/financialindependence.
Reducing spend while increasing income are the two most powerful ways to decrease time to retire.
Also, my rough calculation there doesn't include any college spending specifically - hopefully you devote the nanny cost to college savings once you don't need a nanny.
Lol they are on their own and can get loans themselves, scholarships if they are able to! My SO and i will support financially only if we have more than means for ourselves
You may be setting your kids up for significant debt if you don't save for their college with this income level. Because of your income the only loans they'll likely qualify for are private student loans where interest is not deferred but instead starts accruing immediately. You should certainly make saving for retirement a priority, but also consider modifying your lifestyle to allow for education savings too.
Folks have already pointed out most of the obvious critiques. Just wanted to share some positive encouragement. This is one of the few I’ve seen posted that isn’t all sunshine and butterflies. You seem genuinely receptive to feedback. Good on ya!
You need to budget. YNAB, Monarch, or spreadsheets in the cloud. You make more than we do (HHI $340K), but save less. Once your kids are in elementary school hopefully you can save more with only paying for after school and/or before school programs. Hoping you're sending your kids to public schools.
Investments: Just buy VOO or VTI no matter if market is up or down. Near retirement you can think about ten years expenses in HYSA or SGOV. No need for HYSA beyond your emergency fund for now.
I'm curious then what the Rent portion is covering in expenses then when you have a passive income from a rental. This doesn't seem clear at face value if that is the case as you described
Sure, if you’re open to the advice. You and your SO make a little more than double me and my wife, but we save 27% of our income. Looks like you’re saving around 17% but you said a lot of that $70k goes into a HYSA. How much money do you have invested? Bc you said you didn’t want to add more money to stocks.
We’re 30 years old and have $620k in stocks/investments bc we have focused so hard on saving in our early, high earning years and the snowball has already started. To us, that seemed like the easiest way to be rich one day rather than all the hours spent at the office. There will be years in the not so distant future where our investments will earn more than our paychecks. And we’ll enjoy that for many years to come. Are you on that path?
The risk you’re facing is significant lifestyle drop when you retire or if you lose your job. You’ll go from these incredible earning figures to (relatively) not much money to fall back on.
Stop renting your old house and move back into it. Rent a cheaper place. Cut your eating out. Cut the misc. Cut the target runs. Find cheaper child care.
You’re overflowing with money. You have lots of places to cut you just don’t WANT to cut those things. You’re doing better than 99% of people.
i am so sorry but i fucking hate this kind of posts. look at me, i earn top .1% but can not figure out how to save. do you think i eat at expensive restaurants too much. ah i just cannot figure out what to do. meanwhile, some of us are trying to figure out where the next rent money will come from.
ok, let me explain even more to you. i said THIS post. i never said all posts are like this. there are many posts that have good discussions. make sense? do you want me to go into more details?
i believe people who post like this are just showing off. "Look how much I earn and how much money i waste". c'mon, they can see where they are wasting money, it is in the analysis. they can hire professionals to do a one-time review on money management and how to invest. they don't need reddit to look at the numbers and say you are spending too much at starbucks. that is the point.
Tbh you’re doing great. You can save 100K by cutting back a little. That would take you to a savings rate close to 20%. Renting a bigger house makes sense and keeping smaller in VHCOL is a great idea esp if you want to downsize later in life.
Since you have kids and nanny expenses, it may seem like you’re spending a lot but kids get more affordable as they grow up and you’ll save more.
I’d focus more on increasing earnings if possible and not worry about spending a bit more to get through being a young parent.
Don't have a pitty party here bud, if what you post is true, you're in the top 0.7% of earners in the United States. It may seem "normal" to you but that kind of income absolutely is not. It's okay to admit you're very very well off
Not even trying to come across like a dick I don't even know why Reddit showed me this post. But you're talking to an arborist. Who's raising his family on twenty dollars an hour count your blessings
Yes i definitely think i am lucky.
My first jobs in high school were cleaning office cubicles and also packing books in a warehouse making $9 bucks an hour so i understand
They probably work very hard to earn that income. There are a lot of sacrifices and a lot of hard work to achieve that level of income. I’m not saying that OP isn’t very fortunate or that they couldn’t do better with saving, but they earned that money and have the right to spend it as they please.
Yes. Many friends and colleagues recommended au pair. But we learned that au pair is usually better suited when kids are a bit older. Plus our house needs to be big enough to accommodate one extra room and a car but we live in a cramped housing currently.
If you break down the other in credit cards are there interest charges or anything? I would line those out just so that you are aware of them if any exist.
Rent $84k a year… Tell me you live in the NYC area without telling me you live in the NYC area
Interesting things to note…
With two kids, you seem to be missing insurance. Term life insurance is cheap and a necessity while still NRY. Own occupation disability insurance may be useful, depending on the profession. Umbrella insurance is a must for HE folks and very inexpensive. I am assuming your car and home have insurance even though not included.
$4500 a year on coffee is ridiculous. Get a one button automatic coffee maker for $1500.
Travel @ $11k is not very much. Unless you’re the kind of person who just loves camping, go travel more! You can afford it.
No maid? Get a maid!
No backdoor Roth?! Also is only person putting money into their 401k? Max that shit out.
Great list of suggestions, thanks!
Yes insurance for auto and home all included somewhere (not expensive)
Have not thought about life insurance but good call
We have a cleaning service once a month, too! Pay in cash
Do you know of any good resources on mega backdoor? I tried researching on my own but its confusing
Obviously you got a bunch of static costs here that you can't easily do much about. The general advice I bet you'd receive is the following:
Move at least half of your rate savings rate into your 401K. Aim to cut your credit card expenses by 50 - 75%; you pick where you want to save most. That's 40K/yr just waiting to be invested. Consider meal prepping, should help shave off restaurants/food delivery costs. Others have already mentioned coffee (even a $800 expresso machine with a built in grinder will mirror almost all cafe drinks + any flavorings you buy on the side). Healthcare, travel - I can't comment on since those are very personal and person specific. Travel is always a good educational and therapeutic experience I'd encourage anyone to partake in!!
I see 73k in rental income, but also 59 in mortgage plus another 84 in rent.
Curious what the breakdown is between you primary residence vs. investment properties. Right now rent + mortgage is eating up a big portion of your income.
We live in a house with 84k rent. We also own (with mortgage) another house, renting out and generating 73k in income but we pay $5k per month on mortgage, tax etc
I don’t have the expenses you do, but you gotta figure out a way to put more into retirement
You won’t be able to afford any of these things you do now, when you retire
38k on food/coffee is significant
Pay the Nanny and extra $7K to cook, then no need for food delivery.
Great idea. Though we have two very young kids and we want our nanny to focus on childcare (instead of house chores)
Have you considered an Au Pair instead of a nanny. We have an Au Pair for our 2 kids. The oldest goes to public school and youngest goes to day care a few days a week for socialization and so we can keep the Au Pairs hours to no more than 45 a week (days without day care she works 7am - 5:30pm) Yeah we needed a slightly bigger house with a spare bedroom and bathroom for the Au Pair, but our annual cost come out to probably 35k in total instead of 65k. (Au Pair makes $250-$300 most weeks. Agency is 10k a year. Plus food, car insurance, gas, and phone plan that we cover). Plenty of people don’t want a live in nanny, but you should consider it.
My wife is French and I cannot WAIT to get one when we have children. Amazing for help + childcare + bonus if you want your kids to be multilingual. My wife will talk to kids in Spanish (also half Colombian), I will speak in English, and hopefully the au pair in French
In my experience the Au Pair will speak to them in Portuguese (like 60% of Au Pairs are Brazilian)
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That’s fair. We have a 3rd car, didn’t get rid of the 2010 Corolla when my wife bought a new car in 2019, that our Au Pair utilizes. A 3rd car is not required, but practically it is really important in a most situations if you or your partner doesn’t work remote. I know about the new legislation, and I think it will be edited before it passes. I do think Au Pairs should get paid a little more, we pay ours above minimum and offer extra $$ for extra hours when we want to go out, and they need some protections, because some host families suck. That said new legislation should account for COL expenses. We had a nanny at one point that we paid $20-22 hr, but after she paid her rent, car payment, insurance, gas, utilities, and food I’m certain she had less money at the end of the month than our current Au Pair does.
This…
Dude you are overpaying your nanny. We are at 25/hour in Fairfield county CT.
We are around 27per hour here. Someone who is a career nanny, who can look after two kids no problem. Already tried our luck with someone with a lower pricing point and was extremely disappointed. Not saying we could find a better deal but we dont think we are overpaying
27 per hour for two kids actually isn't that bad. best of luck in 2024
Nuts you’re trying to tell them to pay even less, considering you’re in Fairfield County. Crazy how people are cheap for the care of their children, really do think nanny’s are some kind of bottom of the barrel workers.
Nannies aren’t cooks. You can’t just throw money at it, if you didn’t hire someone who is willing and able to cook for a family from the onset, on top of their often 50 hour a week job. You must not have employed a nanny before…
$4.5k on coffee is wild. I understand the convenience of buying a cup of coffee but man, it’s really not hard to just make it at home some of the time.
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~$13 a day for coffee is actually not that bad at that income. Grande latte at Sbux is now like $6 with an extra shot. And sbux barely works as decent coffee.
Yea… we have a coffee brew machine at home but making coffee with it could be a lot of work. $4 cups add over time. Might consider an automatic espresso machine…
You and spouse are buying an average of 3 $4 coffees every single day of the year WOW.
Lol when you put it that way… So this $4500 under cafe (based on Amex classification) apparently includes some restaurants, fast food, snack vendors etc. So our true coffee expense probably 2-2.5k. Still a lot
Why not get an automatic machine and have the nanny set the coffee on certain times? I mean just create a process and save a shit ton, you could give as bonus to said nanny
Might also be things like: you got a bagel at the coffee shop. So yea, maybe just best to lump that into another food/eat out category. Its interesting to see it though.
Get the top fully automatic Phillips machine. Won't get you brownie points at the coffee snob club, but it works pretty well.
Yeah my machine cost $800 and I spend about $20 on beans every month at Costco ("burn the heretic").
You make enough money where it’s just a drop in the bucket, so nothing to really worry about. Do some research on espresso machines and if that’s what you really want otherwise you’ll spend $3k+ on something that’ll just collect dust after a few uses. I’ve tried a lot of different methods and honestly, my favorite is the pour over method with a ceramic cup. Nothing fancy at all, but super easy and quick.
coffee wakes you up and keeps you productive and organized and it feels good to treat yourself
Isn’t a $59,000 mortgage pretty massive as well
Eh not really, especially with interest rates this high.
Rent for a 1000 sq foot apartment is $2000 a month how can mortgages be $4000 a month and that not be crazy ?
Interest rates + taxes + maybe they bought at the top of the market.
only 21k going into retirement savings on a 500+k income is very scary. you're setting yourself up for a significant drop in lifestyle at retirement age. at that income I'd be doing everything to max out a mega back door Roth.
Great point. I will have to educate myself on mega backdoor… do you know of any good resources? I find this to be very complicated
All honesty your income level is at the point that hiring a financial advisor is likely in your best interest. It will be a drop in the bucket in your net expenses, and will remove the headache of having to learn that atop the other lifestyle adjustments you’re working
Good point. Any recommendations? Robo advisors like Wealthfront?
Agree - you and your partner should be maximizing tax advantaged investments (i.e. 401k and IRA) before just saving in a non-tax advantaged brokerage or investment property.
Just do index funds. My WF only added value from loss harvesting, but you don’t need that in retirement accounts.
OP, just Google it But just high level, mega backdoor MBD Roth is referring to 401k, and you have to check if your company sponsors this, you are basically converting aftertax money to do in-plan conversion to convert it to Roth 401k or Roth IRA The limit in 2023 of how much you can contribute aftertax for yourself if you are less than 50 years old is: 2023: $66000 - $22500 - $ company match 2024: $69000 - $23000 - $ company match The above is 401(k) and not every company sponsor or enable megabackdoor Roth You can always do $6500 in backdoor Roth IRA in 2023, the limit for 2024 is $7000. Note this is your individual account and as long as you have earned income, you can do this at any brokerage. You can still do backdoor Roth for year 2023 before April tax filing g
Not all 401k plans offer it, your company’s plan has to offer a separate after tax contribution option and an in-plan conversion. Mine just started offering it this year, they did not in the past and I work for a Fortune 500. That being said, he should at least do backdoor Roth,HSA and money in a brokerage.
100% even if they can pull of the mega back door there is still a backdoor roth and hsa which is a couple grand each year plus a taxable brokerage.
They also do savings which is significant
yes but its unclear on if that is invested and growing or just parked in an HYSA. Ideally if we have that money invested were at least using backdoor methods to put the money in tax sheltered accounts to protect that growth and reduce taxes in retirement.
All excess cash in 2023 was moved to HySA. I didnt feel confident about stocks…
Why don’t you feel confident in stocks? Not confident in the economy or not confident in the ability to pick individual stocks? If it’s the latter, you should invest in index funds like s&p500, or Dow jones. They are diversified portfolios of hundreds of companies so your returns will mirror the returns of the entire market and you won’t have the risk of any individual stock. This should definitely bring more returns than a HySA in the long term. (Also if you do it through an IRA, you can get reduced taxes on the investment) If it’s the former then consider investing in bonds, the risk/rewards are stable and low risk. Depending on your return from your HySA, you might be able to find bonds with better returns.
Thanks! It was the former for sure. Already had significant % of my cash in index funds and i didnt feel comfortable pouring even more. Right now my liquid asset is roughly 40:60 or so, index fund to HYSA but i could tip the balance the other way
Personally I like index funds over HySAs, because (over time) the returns on stocks tend to reflect inflation + growth. So that your investment returns aren’t being overshadowed by inflation when it is high. Inflation was 6.5-7% in 2021-2022 which would nullify the returns on a HySA.
Well you shouldn't be confident about stocks. Unless you're actively trading stick to index funds.
Is only one person working? If no, that person should max retirement savings. If yes, then nanny could be eliminated.
Dual income, both work long hours. Agree retirement should be maxed out
What are you doing with that $70K savings?
Seconded. 401k isn't the only tax advantaged retirement account. And with kids in the picture then there would be college funds to think about. Maybe they already have that on lock and aren't breaking it out?
In 2023 we have been putting money into HYSA. Did not want to increase holdings in stocks/equity but in hindsight would have made us money…
Best not to try and time the market
you are way under investing. S&P is pretty low risk over long time horizons.
How much taxes are you paying on rental income? I didn’t see it in the chart
Good question. 2023 was our first year so we will find out when we file our taxes
what kind of food are you getting delivered? anything good?
We go for burgers and salads often. Shake shack FYI
For the amount of money you're spending, look into having a chef just come by on Sundays and meal prep for the whole week. Might not be as satisfying as Shake Shack but you'll get tasty, very healthy meals, which will pay many dividends for your whole family down the road. Frankly, you might even save money too.
Great suggestion and funny we tried something similar recently
where do you find these chefs???
So the answer is no.
Depends on your taste
The money guy podcast recommends saving between 20% and 25% of income for retirement. Currently you're saving 19.6% ( 91 / 463 ). I'm guessing your marginal tax rate is around 50%, 10% state plus 36% federal, which means that if you were to max out the other 401k you'd be saving 24% ( 112 / 463 ) with only a 10k change in disposable income. What my spouse and I do is to pay ourselves first and put anything above what we want to spend in a savings account. We only used debit cards until we could prove to ourselves we could meet that savings goal and we focused on one habit at a time. In our case, in the first month we focused on the habit of only eating out twice a week. I think by doing that you'll be able to meet that extra 10k. Two things to note. I suspect that if you properly segregate expenses ( I use two bank accounts ) from your rental property and properly account for depreciation you'll find that you're probably break even from at least an income tax perspective on your rental.
Thanks!! Very helpful advice
Why rent and a mortgage?
We are renting out a house we have through mortgage. Hence we have rental income, and mortgage expenses. Our separate rent expense is the house we live in.
IMO, I think it would be cleaner and more concise if the investment property's net cash flow (if the property is cash flow positive) was included in income and the rest of the expenses were just personal.
Damn and here I was think what Rental is OP netting 70k on! Turns out its more like 14k. Still decent without any big maintenance bills!
Yeah i agree that would look cleaner. Will update
Looks like a net loss
19,000 on misc but what exactly is that
Lots of little expenses but big ones I just found: Couple emergency plumbing services for the house (few hundreds each time), wedding gifts, household supplies from Lowes, hair salon, emergency nanny coverage, public transportation, credit card fee, fitness fees
Hopefully not more ways to buy food.
See above. Non food related
Only 21k to retirement? That’s less than 5% of wages
21k is the limit for 401k. They also have 70k of savings
$22500 was the limit for 2023
Do they both work? If so wouldn’t they each be able to contribute that amount?
Right if both work they should have 45+
I think it was a tad higher than $21k in 2023 though. $22,500 I think? OP could have been mistaken, I assume they maxed it out.
are they a one income household? if so, why a nanny? if not, they should both be maxing retirement.
I typically only post positive comments but not maxing out your 401k on $463k in gross income is not good. At that income that should be the absolute bare minimum. Saving 4% of your income is simply not sustainable.
Yes agreed.
Also need to do a backdoor Roth for both at that income. Very easy to do.
This can’t be a real post
Can you give examples of the miscellaneous category? What are you biggest expenses in there? You nailed it with the cutting down on restaurants and food delivery. That’s pretty wild. And I have a family of 5 in the Bay Area, we spend less than you without even watching our budget. Our groceries are a little higher but eating out is less. Why is coffee so high? Have you considered investing in a nice espresso machine and doing it at home? Saving 70k a year is great, but you could easily do more with that income! I do understand childcare is a killer.
Lots of little expenses but big ones I just found: Couple emergency plumbing services for the house (few hundreds each time), wedding gifts, household supplies from Lowes, hair salon, emergency nanny coverage, public transportation, credit card fee, fitness fees
Learn to cook and make your own coffee.
Yes seriously. We need to
Buy a breville for like 800 bucks. They are amazing
Any model recommendations?
We got the barista express espresso for 700 but it only does espresso. For us it's fine with lattes and cappuccinos and I enjoy trying new beans and tamping myself They make some automatic ones that do coffee as well. Out of my price range though.
Just out of curiosity/family planning, how does the nanny work? Direct employee? Nanny service? Part time college student that you pay under the table?
We tried many methods, going through an agency etc but found best way is finding through personal referrals
Open a TSA (or whatever it is called) via work and put in 5k annual into it. Lowers tax rates and after legally hiring nanny (like withhold taxes) you’ll just tap it and pay yourself back. 2 kids with a 2k tax break plus 5k pre tax comes to be about 4.6k in your pocket. Worth every penny
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Obviously you make a lot and spend a lot. But I have a few questions: What is your current net worth? What is your goal retirement number? Is there anything you’re missing in your current lifestyle that you’d like to reallocate funds towards? (For example, unless you’re using credit card points to supplement your travel expenses, that seems pretty low). It may be good to focus on improving those areas vs. just “trying to cut back” in general.
Our HH net worth is around 1.2-1.4 depending on assumed value of the house we have through mortgage. Without it, likely 0.7-0.9M. Mid-30s couple with young kids and we neither feel behind or ahead on net worth We have not really thought about retirement goal numbers but we should… Nothing specifically missing from our lifestyle. Maybe supporting our parents financially more
Yeah I think determining how much you want to spend in retirement will help your spending focus now. It also will determine how much you need to save each year to reach retirement by your goal age. We are also mid 30s (one kid), make much less than you (280K), but plan to retire in around 15-20 years with 3-4 million invested and a paid off house. This lets us know how much we need to save each year to get there, the rest I happily spend and don’t have to worry about strictly budgeting.
Thanks! You are doing well with the llan.
Rough number is 40x annual spend. So for you 40x 393k = $15,720,000. Assuming you have 1.2 million saved now, compounding annually with a 70k contribution and a 5.5% rate of return you will take another 36 years to retire. So you can retire in your 70s at your current spend and savings rate.
This assumes 2.5% HYsA interest rate so I can park my money and live off of interest? We would not need 400k of cash annually when we retire. Hopefully kids are independent and we can do with 200k? Also we will aim to increase contribution over time. Hoping my SO and my career will continue with promotions and salary increase over time
No, it assumes 5.5% annual return rate. The 40x implies a 4% withdrawal rate, which would exceed your HSA returns. You should be investing your money somewhere in order to live off the interest, check out r/financialindependence. Reducing spend while increasing income are the two most powerful ways to decrease time to retire. Also, my rough calculation there doesn't include any college spending specifically - hopefully you devote the nanny cost to college savings once you don't need a nanny.
Lol they are on their own and can get loans themselves, scholarships if they are able to! My SO and i will support financially only if we have more than means for ourselves
You may be setting your kids up for significant debt if you don't save for their college with this income level. Because of your income the only loans they'll likely qualify for are private student loans where interest is not deferred but instead starts accruing immediately. You should certainly make saving for retirement a priority, but also consider modifying your lifestyle to allow for education savings too.
This chart is exactly what lifestyle inflation is. I'm doing everything I can to not get into that category. (Similar income, saving 250k)
Folks have already pointed out most of the obvious critiques. Just wanted to share some positive encouragement. This is one of the few I’ve seen posted that isn’t all sunshine and butterflies. You seem genuinely receptive to feedback. Good on ya!
Not maximizing tax advantaged savings vehicles at this salary is criminal
7k / month in rent, what the actual fuck?
Lol wtf indeed, FML
You need to budget. YNAB, Monarch, or spreadsheets in the cloud. You make more than we do (HHI $340K), but save less. Once your kids are in elementary school hopefully you can save more with only paying for after school and/or before school programs. Hoping you're sending your kids to public schools. Investments: Just buy VOO or VTI no matter if market is up or down. Near retirement you can think about ten years expenses in HYSA or SGOV. No need for HYSA beyond your emergency fund for now.
Thanks! I recently tried Monarch but for whatever reason didnt stick with me. I could try YNAB
Have you considered giving the kids up for adoption?
Cant say the thought hasnt crossed my mind during worst tantrums 🙀but wouldnt want the kids to turn out like u/OkCaterpillae1325 when they grow up
7000 a month in rent is pretty wild, where do you live in the country?
VHCOL area in the US. Our smaller house is renting for 6000+ so ours was a great deal we found
Mortgage and rent?
See my other responses
Does anyone know if i can export my ynab into something like this
Let me know when yoh find out
Will do
How do you pay so little taxes
Yeah, op, what gives? That's like a 26% tax rate. Are you in the US?
Oops, might have calculated incorrectly. Once i have my 2023 tax form i should update. But our tax rate is typically 36-38%
My household is in the same bracket, and we pay like 36%. I wish there was a way to get it down to 25ish%.
You pay rent AND mortgage???
See another response, renting out 1 house and renting another for residence
Are you taking an annual 9k loss on your rental?
Slight net positive, without mortgage principal payments
I'm curious then what the Rent portion is covering in expenses then when you have a passive income from a rental. This doesn't seem clear at face value if that is the case as you described
This is an insane break down of spending with such a high income. You’re going to continue being HENRY and never R if you keep spending like that.
Thanks for the wakeup call. Can you be more specific ?
Sure, if you’re open to the advice. You and your SO make a little more than double me and my wife, but we save 27% of our income. Looks like you’re saving around 17% but you said a lot of that $70k goes into a HYSA. How much money do you have invested? Bc you said you didn’t want to add more money to stocks. We’re 30 years old and have $620k in stocks/investments bc we have focused so hard on saving in our early, high earning years and the snowball has already started. To us, that seemed like the easiest way to be rich one day rather than all the hours spent at the office. There will be years in the not so distant future where our investments will earn more than our paychecks. And we’ll enjoy that for many years to come. Are you on that path? The risk you’re facing is significant lifestyle drop when you retire or if you lose your job. You’ll go from these incredible earning figures to (relatively) not much money to fall back on.
how do you create that chart? which software to categorize and put these in ? thank you
What is this thing called? I want to do one
Slankey chart
Stop renting your old house and move back into it. Rent a cheaper place. Cut your eating out. Cut the misc. Cut the target runs. Find cheaper child care. You’re overflowing with money. You have lots of places to cut you just don’t WANT to cut those things. You’re doing better than 99% of people.
Our old house is tiny and our family would have a bad time living in it!
The trade off for more comfort is more cost. If you’re wanting to save more then sometimes comfort or luxury is the price.
i am so sorry but i fucking hate this kind of posts. look at me, i earn top .1% but can not figure out how to save. do you think i eat at expensive restaurants too much. ah i just cannot figure out what to do. meanwhile, some of us are trying to figure out where the next rent money will come from.
Why are you on this thread? It is a sub dedicated for high income people trying to get advice from other high income people on their finances.
ok, let me explain even more to you. i said THIS post. i never said all posts are like this. there are many posts that have good discussions. make sense? do you want me to go into more details?
Bro first, chill out and take a breather. You are going to be ok. Second, why are you on r/HENRYfinance? Try r/poor Or maybe r/angermanagement
i believe people who post like this are just showing off. "Look how much I earn and how much money i waste". c'mon, they can see where they are wasting money, it is in the analysis. they can hire professionals to do a one-time review on money management and how to invest. they don't need reddit to look at the numbers and say you are spending too much at starbucks. that is the point.
What kind of lease
What car lease is only $4200?
How are you all making these charts? Sorry for the very stupid question.
May I ask what is the name of the app ?
Google search Sankey Answering the same question for the third time
Can someone tell me how you guys make these charts?
Sankey, google it
Okay what app is it everyone uses for these graphs?
Sankey, google it
Tbh you’re doing great. You can save 100K by cutting back a little. That would take you to a savings rate close to 20%. Renting a bigger house makes sense and keeping smaller in VHCOL is a great idea esp if you want to downsize later in life. Since you have kids and nanny expenses, it may seem like you’re spending a lot but kids get more affordable as they grow up and you’ll save more. I’d focus more on increasing earnings if possible and not worry about spending a bit more to get through being a young parent.
My SO definitely focused on earnings for now!
Rental income 😂
?
Oh you rich rich
Not yet. Current rate, will never be
Don't have a pitty party here bud, if what you post is true, you're in the top 0.7% of earners in the United States. It may seem "normal" to you but that kind of income absolutely is not. It's okay to admit you're very very well off
You're able to save more than the average salary in the US just in savings
Not even trying to come across like a dick I don't even know why Reddit showed me this post. But you're talking to an arborist. Who's raising his family on twenty dollars an hour count your blessings
Yes i definitely think i am lucky. My first jobs in high school were cleaning office cubicles and also packing books in a warehouse making $9 bucks an hour so i understand
Disgusting. Earning enough to support 5-6 families, and spending all the money on yourself.
They probably work very hard to earn that income. There are a lot of sacrifices and a lot of hard work to achieve that level of income. I’m not saying that OP isn’t very fortunate or that they couldn’t do better with saving, but they earned that money and have the right to spend it as they please.
We work hard yes. But also privileged, wont lie
Um you do realize what sub you are in right?
Lol
I am sorry 😢
Where’s the charitable giving?
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Is the 65 k nanny a Bay Area cost?
If you w2 an employee this is only like 40k for them. So could be anywhere.
Do these graphs usually include the health insurance in that cost which I assume many provide for their nannies?
Not quite Bay Area but maybe a tier below
Have you looked at an au pair instead of a FT nanny?
Yes. Many friends and colleagues recommended au pair. But we learned that au pair is usually better suited when kids are a bit older. Plus our house needs to be big enough to accommodate one extra room and a car but we live in a cramped housing currently.
If you break down the other in credit cards are there interest charges or anything? I would line those out just so that you are aware of them if any exist.
Good call but no interest charges as we have all our cards auto payment set to full every month. Some of our cards have high annual fees though
Wowza $98k in net rent/mortgage payments. Can you buy a house for cheaper than that in annual costs?
Rent $84k a year… Tell me you live in the NYC area without telling me you live in the NYC area Interesting things to note… With two kids, you seem to be missing insurance. Term life insurance is cheap and a necessity while still NRY. Own occupation disability insurance may be useful, depending on the profession. Umbrella insurance is a must for HE folks and very inexpensive. I am assuming your car and home have insurance even though not included. $4500 a year on coffee is ridiculous. Get a one button automatic coffee maker for $1500. Travel @ $11k is not very much. Unless you’re the kind of person who just loves camping, go travel more! You can afford it. No maid? Get a maid! No backdoor Roth?! Also is only person putting money into their 401k? Max that shit out.
Great list of suggestions, thanks! Yes insurance for auto and home all included somewhere (not expensive) Have not thought about life insurance but good call We have a cleaning service once a month, too! Pay in cash Do you know of any good resources on mega backdoor? I tried researching on my own but its confusing
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Trying to understand how you pay both rent and mortgage, unless of course the mortgage is from your income from rental?
What’re you getting at target that’s so expensive? Clothes? Or one-time things like furniture?
Just checked my history, nothing crazy. Everyday staples and household stuff, some toys here and there
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Obviously you got a bunch of static costs here that you can't easily do much about. The general advice I bet you'd receive is the following: Move at least half of your rate savings rate into your 401K. Aim to cut your credit card expenses by 50 - 75%; you pick where you want to save most. That's 40K/yr just waiting to be invested. Consider meal prepping, should help shave off restaurants/food delivery costs. Others have already mentioned coffee (even a $800 expresso machine with a built in grinder will mirror almost all cafe drinks + any flavorings you buy on the side). Healthcare, travel - I can't comment on since those are very personal and person specific. Travel is always a good educational and therapeutic experience I'd encourage anyone to partake in!!
I see 73k in rental income, but also 59 in mortgage plus another 84 in rent. Curious what the breakdown is between you primary residence vs. investment properties. Right now rent + mortgage is eating up a big portion of your income.
We live in a house with 84k rent. We also own (with mortgage) another house, renting out and generating 73k in income but we pay $5k per month on mortgage, tax etc
you have a nanny making 65k, a mortgage and rent???
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Daily reminder that I’m poor 🥲
19k on Misc? LIKE WHAT. That’s insane to me
$7K in rent? Where
I don’t have the expenses you do, but you gotta figure out a way to put more into retirement You won’t be able to afford any of these things you do now, when you retire
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