Reader Profile: SF (Free Money Finance)

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Next in the series is FMF reader SF. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.

I am 29 (about to turn 30) and live in Southern California. I have a bachelors and masters degree in accounting and currently work as a forensic accountant. I have my CPA license in California and I am also a Certified Fraud Examiner. I got married about a year ago, my wife (age 30) has a bachelors in music and a masters in elementary education. My line of work is very stable, though my wife's isn't as stable because of the teacher troubles in the state of California. We currently have no children, but are planning on starting a family within the next couple of years.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).

As stated above, both of us are working. My salary is in the upper 60K range with bonus possibilities depending on productivity and other factors, accruing every quarter and payable in February. My wife is an assistant teacher at a private school and currently brings in around 20K, which is low for her education level, but the private school job should allow her to jump to a full-time position either there or at another school next fall with a corresponding pay increase.

Expenses wise, the biggest item is rent, coming in at 1125/month. Yes, this is high, but it also allows both of us to live very close to our jobs, cutting down on commute time and expenses and in our view, worth the extra money to get this location. I have about 11K in student loans remaining from my masters degree (bachelors was a full-ride scholarship, thank goodness) at 140/month, 6.8% fixed interest which I am paying 200/month on for now because after 4 years of on-time payments, it drops to 4.8% interest (and prepayments count towards running the clock faster). I also have a car loan from a new car I bought in mid-2009 at around 12.5K, paying 450/month for another 2 1/2 years. This loan is at 0% interest and the car is above water now, so prepayments to this loan aren't the highest priority. In hindsight, I probably got too much car, but I was single at the time and living with roommates, so I had more free cash flow. I plan on driving it until it falls apart, so once it's paid there won't be any new car for a while. My wife's car is paid off, but is old (1999, 140k miles) so we're saving up to replace that car, at around 6k right now. We plan on riding that car until either it falls apart (at which point we pay cash for the best used car we can find) or until we have enough saved to pay cash for a new car. She also has student loans (about 4k in undergrad, 41k for her masters, undergrad is at around 3%, masters at 7.25%, unable to consolidate the two because the undergrad is Canadian student loans).

We're practicing living on just my income for when we start the family. Right now, all of my wife's earnings go toward her student loans 1st (payments about 400/month for 25 years from a consolidation, we're paying 500/month which should let us pay it off in around 10-12 years, though I'd like to pay that off even sooner) and her replacement car fund 2nd. Once we have her replacement car, all her earnings will go to repaying her loans. We also tithe to our church 10% and I contribute 6% of my salary to my 401k which has a 100% match up to 1st 5% of contributions. Additionally, I put between 250-300/month into a Roth IRA. Currently the 401k + rollover IRA from previous job is around 45k, the Roth is around 4k. Emergency fund is around 2.5k (this is separate from the car fund) which I'm trying to increase by about 100/month.

What are the current financial issues you're facing (saving, paying off debt, etc.)?

The main issue we're currently facing is the replacement car for my wife. It could give out tomorrow, it could last another couple of years, but we're saving up to take care of that 1st. 2nd is reducing my wife's student loans. 3rd (maybe 2b) is boosting the emergency fund. I'm toying with the idea of either reducing or eliminating the Roth IRA contribution and rerouting it to the emergency fund buildup until I have at least 3 months of expenses saved up. I feel this is an acceptable move since with my 401k contribution/match, I'm effectively at a contribution of 11% of salary. Thoughts?

The other issue which will come up soon is when we start having children. We want my wife to be able to stay at home, but right now with all our expenses I can't cover her student loans on my salary alone, not until I finish paying off my car. She can do piano lessons and tutoring from home while taking care of the kids, but this income can be unpredictable. Not currently an issue, but one to look at down the road and keep in mind.

What are your plans for the future. (retire early, build your career, etc.)?

Currently for me it's building my career. My work is fairly specialized, so we will most likely be staying near the big cities to allow me to continue it, though we may reevaluate this down the road. My long-term goal currently is to be able to start my own business along those lines (it would be similar to the partner track of a law or accounting firm) or to become a partner in my current firm.

What's your best piece(s) of financial advice and/or your general philosophy on personal finances?

My general philosophy on personal finances is you are the one who should be most concerned about them. It is extremely unlikely that a "white knight" will come in and swoop you away from whatever financial trouble you may be in. Your friends and family care about your well-being, but you (and your spouse/partner, if applicable) are the only ones who can truly do something about your own situation.

Additionally, I'm a firm believer in knowing where you stand financially, even if it isn't good. If you have credit card debt, open up those scary credit card bills. They won't disappear just because the envelope isn't open. If you're investing, know what you're buying, even if that means you stick with index funds. Keep track of your expenses and you can plug those leaks in your budget that always seem to appear while they're small.

Finally, try to anticipate future situations and plan for them. For me, this is my car payment. My family situation has changed significantly since making that purchase and it's reduced our financial flexibility accordingly. I realize you can't anticipate or plan for every possible contingency, but keep an eye down the road for the obstacles you can see.

Source: http://www.freemoneyfinance.com/2012/02/reader-profile-sf.html

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