How a Married Couple in a Los Angeles Suburb Does Money

M & N are a married couple living in a Los Angeles suburb. M is a 29-year-old software programmer and N is a 32-year-old primary care physician. They are both immigrants of Indian origin.

So, M & N, how much money are you making?

M: Last year I worked only for five months, so I made $37,000.

N: I’m making $240,000.

M: This year we are expecting a total combined gross income of $364,000, hopefully.

How does that compare to your expenses?

M: Student loans and mortgages are our biggest expenses. Otherwise we try to live as cheap as possible, hoping that the lifestyle creep doesn’t consume us.

We bought a house in suburban LA six months ago. We saved up for the down payment by staying with my in-laws, but my husband also pays for his parents’ home mortgage too.

Let me give you the breakdown:

N has a medical school student loan. He started off with $431,000, and now he’s down to $380,000. It is financed by SoFi and he pays around $3,800 a month. Even though the minimum payment is $3,100, he tries to pay extra.

We went with a variable rate at 4 percent, but the catch is it can vary up to 9 percent based on the world economy. Fixed rates were 7 percent.

Has your rate gone up since? Or has it been pretty consistently 4 percent?

M: It has been pretty consistent. But then we probably are going to take 10–12 years (if we make aggressive payments), so it can go up at any time during that period.

I have a $28,000 student loan in India from my Masters in Comp Sci. I transfer around $2,000 every 4–5 months whenever I can, based on the dollar/rupee exchange rate.

How do you track the exchange rate? And what’s a “good rate” to you?

M: It’s bad of me to say this, but when the Indian economy does poorly and the dollar value is stronger in the foreign markets, then I usually use this time to transfer money.

Like right now: $1=67.5 Rupees

1 Starbucks tall coffee = 120 Rupees (just to give you an idea of cost of living)

Due to my husband’s higher income bracket we do not get any tax breaks for his student loans. Hence the only tax relief/investment was to get a home. In essence we got more debt to get a tax break, which I know sounds absurd.

So how much are you paying on your mortgage, and how many years will it take before that’s paid off? (And you’ve got N’s parents’ mortgage too?)

M: Mortgage: $3,600/mo for 30 years including property tax.

Parents’ house: $640 (we used to pay the full mortgage, but my husband splits it with his brother now after we bought this house)

We have realized a lot of hidden costs come with owning a house. Property tax, home insurance, earthquake insurance, and basically fixing the house. Our house was built in the 1960s, so it is as old as my mom.

How many bedrooms?

M: Three bed, three bath. But the owners had re-modeled the bathrooms pretty nicely.

We paid ~$700,000 for the house. Our idea is to refinance the house in 3–5 years when the value goes up and use that money to pay off the student loan.

So you’ve got the student loans and the mortgages, but even though you’re paying a lot every month it seems like your earnings can more than cover it. Is this assumption correct? (I’m curious about whether you feel like you’re earning enough or whether you wish you were earning more.)

M: Yes, that is correct. We do feel blessed.

When we look around and see a lot of people going through bad times, we really feel we are blessed. But one thing is we absolutely had no savings after we bought our house. So we are desperately trying to build that nest egg up, because it doesn’t give me peace of mind.

We have been very careful about our spending and I think we would relax once that mountain of student debt is paid off.

N: Also I don’t know about job security with Obamacare.

M: Apart from these debts, we also have two car loans on an Altima and a Civic, which together costs $700 every month.

The problem with staying so far away from Los Angeles is that we spend an enormous amount on gas, close to $1,000 a month.

But despite all this, I do feel we are earning enough. We just want to make this money work for us.

So you’re building up your savings — are you also building up a retirement fund?

My husband maxes out his 401(k) at $18,000 a year. The only problem is that he has been working only for two years.

I started working from July 2015. As I was an independent contractor, I had to do my savings and taxes. I couldn’t save much last year as I used the money for buying the house, but this year I want to put as much as I can in a SEP IRA, after I keep aside around 40 percent in taxes.

Yay independent contractor taxes!

M: Ha ha. I know, right?

What do you think you do really well, financially, and what do you wish you could do better?

M: I was brought up in an upper-middle-class background in India. My husband was raised in the US, was on food stamps in school and studied on government grants until undergrad.

What both of us do really well is to put a tough check on ourselves and prioritize the essentials. Every day we think about how to tackle the debt and build investments at the same time (hence the house).

We do not buy anything fancy, which is a huge surprise to my friends coz I am a “doctor’s wife” and my purse is from Target. GO TARGET!!

Target has great stuff!

I know right. Who needs that crappy Louis Vuitton?

I see people everyday, interns at work, who have just started out and are already driving a Tesla or a Mercedes—and living paycheck to paycheck struggling to make rent.

We, on the other hand, try to keep tabs like limiting ourselves to $30 dinners on the weekends.

We had even stopped going to the movies as at one point we didn’t wanna give up $26 on tickets. We would wait to catch up on them when they came on Redbox.

My mom taught me young that “Money saved is money earned.”

Something that I wish we did differently would be: learn about investing early.

N: I wish people had taught me more about debt management in high school/med school.

M: I sometimes feel that I am too focused on paying the debt that I forget to enjoy life. Like, my husband and I have been married for two years but we haven’t taken a single vacation in two years. As a contractor I felt guilty to take time off, because it comes out of my paycheck. My husband and I both worked this Memorial Day. 😞

What do you think is preventing you from planning that vacation, and what kind of financial security (or job security) would you need before you could plan it?

M: The feeling of guilt, Nicole. Like, should I be taking three days off from work when I can make $900 and pay off debt or save that money?

N: She is too obsessed.

M: And maybe have a solid $35,000 in my account that can be my F@$# off fund?

Sometimes my husband wants to get nice, quality furniture but then I read a Billfold article where people say buying Ikea furniture is good enough and that makes me feel guilty about spending, thinking I should spend on experiences more than material stuff. But I am not doing that either, am I.

There’s a difference between “good enough” and “quality,” though. Good enough has an implied “for now” at the end of it. Good enough eventually breaks down.

M: But then with people’s liking for things changing so fast, who would keep a sofa for 10–12 years?

I’d love to buy a sofa I think would last for the next 10 years!

On that subject: where do you want to be in 10 years, finance-wise? (Or furniture-wise?)

M: 1) Pay off student loans in 10 years.

2) Look at buying another investment property like a condo near a university, the rent from which can cover its own mortgage.

3) Manage to take 2–3 weeks off a year.

4) Go to a furniture store and buy a piece saying “I deserve this and I worked for it” and not feel guilty.

I hope you get all of those things!

Last question: what advice do you have for Billfold readers?

M: Both of us thought about this a lot.

One thing is to talk to elders. Nothing can beat experience. You can even learn from them even when they say “I wish I had done this.”

And cook your own damn food. Once-a-week dinner out is good for your body and wallet.

N: Try to live like a medical resident or well below your means until you have no debt.

Also, don’t buy expensive cars. The minute you drive off a showroom their value has depreciated. 😛

Lastly, don’t let money go to your head. Try to be humble.

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