Doing Money Series: Meet Michelle
Hi Billfolders! I’m Michelle, and I volunteered to write a sort-of “doing money” series where you get to follow me for a to-be-determined amount of time and see how a married, thirty-something tax accountant mom does money.
I thought we might be an interesting case study for everyone to follow because we have a lot going on over the next year. We’re expecting our second child soon, which means I’ll be navigating the finances of maternity leave, determining how and when to return to work, integrating increased daycare costs in our budget, turning in a car at the end of a lease period, and am anticipating a raise, a bonus, and a promotion — all before taxes are due on April 15th! We’ll be managing all of this financially, on top of our normal budget considerations around debt repayment, savings, and making our money work for us.
Each month, I’ll give you all the details of how my actual spending compared to my budget and cover something extra about our finances — like how and why my husband and I budget separately, or how we are planning financially for maternity leave in conjunction with the benefits my company offers. I’ve changed our names and have been purposefully vague in some areas to protect our identities. Despite that, I’d like to be as interactive and transparent as possible with all of you — so if you have questions or would like to know anything more specific about how we “do money,” let me know down in the comments and I’ll address it in future posts.
I live with my husband, Andrew, in a house we own in the suburbs outside of New York City. I am a tax accountant and my husband has his own business doing stuff that is way cooler than tax accounting. We currently have one child, one dog, and, as I mentioned above, another child joining us this fall. Currently, my husband and I budget separately. We do this for a lot of reasons, (which I’ll be covering in next month’s post) but it works for us because we work together to fund our major financial goals or emergencies and we are transparent with each other and check in often about how our finances are doing. This means that most of the financial details you’ll see in these posts are from my side of our partnership.
I thought the best place to start would be to detail my budget — since that’s where we’ll start most months.
Currently, I make $114,000 per year, pre-tax. Here’s (roughly) where all that money goes:
Gross monthly take-home pay: $8,800
Federal income taxes: $1,500
Social security: $490
Work state income taxes: $400
Home state income taxes: $236
Total taxes: $2,740
Health (high-deductible health plan): $255
Dependent care FSA (we max this out at $5K per year): $385
HSA (covers roughly 2x deductible of $2,700): $200
Parking ($7 per day): $67
Total benefits: $933
401(k) (6 percent, employer contributes another 7 percent): $530
Net monthly take-home pay: $4,600
I want to stop here and point out something that still blows my mind when I calculate it out; from $114,000 I only bring home $55,200 after taxes and benefits. This works out to 48 percent, if you do the math. Before it even lands in my bank account, more than half of my pay is accounted for.
I’ve budgeted lots of different ways in the past (something else I’m sure I might cover later on), but currently I go by my own version of the 50/20/30 allocation system. I allow for 50 percent of my take-home pay to cover my fixed monthly expenses, 20 percent to cover financial priorities (aka debt repayment and savings), and 30 percent to cover the variable spending I have each month.
My current monthly budget is as follows:
Net monthly take-home pay: $4,600
FSA reimbursements: $385
Total monthly income: $4,985
“Fixed” monthly expenses
Student loan payments: $600
Lease payment: $280
Wireless bill: $85
Other misc (Patreon, Netflix, iCloud): $32
Total “fixed” expenses: $2,437
Credit card minimum payments: $190
Savings (short-term, long-term, kids): $950
Total financial priorities: $1,140
Everything else: $248
Total variable expenses (estimated, since it’s variable): $1,408
Total monthly expenses: $4,985
I like to call this my “aspirational” budget. Is this where I land every month? Rarely, if ever. Do I think $900/month for food is too high? You bet — and I usually spend less. This is just my budget as it stands right now, and I’ll be tweaking it as we move through the rest of this year and we navigate the life changes mentioned above. Since January of this year, I haven’t incurred any additional debt which means I’m staying within the bounds of $4,600 monthly — but some months that means forgoing savings because I need to pay off a 0 percent APR credit balance that’s expiring, or to pay for travel/gift for a wedding, or to buy my kid clothes.
We have three types of debt: our mortgage, my student loans, and credit cards. I am the dedicated “debt payer” in our current iteration of how we handle our joint finances, because most of the debt is mine.
We pay the minimum amount due on our mortgage monthly, which is $1,300/month. Husband paid $320K for the house with 20 percent down. Original principal: $288,000. Current balance: $238,000 at 3.99 percent APR, about ten years in. Last estimate of the house value by a realtor came in around $365K.
We have $23,100 in credit card debt from basically not having adequate savings. The charges include home repair, some wedding expenses, and medical expenses from the birth of our first child. We also have credit card debt because we just plain overspent when I was working part-time while transitioning back into the workforce after having our first child — the spending was very much needed mentally, but it wasn’t so great for our bottom line. Luckily, it’s all at 0 pecent promotional APR offers, spread out over four cards:
- Card 1: $4,980.00. Minimum payment: $50, actual payment: $60
- Card 2: $5,180.00. Minimum payment: $51, actual payment: $60
- Card 3: $5,080.00. Minimum payment: $50, actual payment: $70
- Card 4: $8,000.00. Minimum payment: $80, actual payment: $80
The first three cards are in my name, so the minimum payments ($190) appear in my budget above. As I’ve paid these down, I’ve kept the higher minimum payments that used to be due so I can pay them down quicker.
As the 0 percent APR offers expire, I check my liquid savings account. If there is enough in there to cover the expiring balance, I pay it off. If the balance is too high to pay off, I pay off what I can and bounce the rest to another card via a 0 percent promo. We feel good about this method because we’re saving on interest while also keeping a cushion in savings in case there is an emergency.
So far, we’ve paid off over $9K in credit card debt this year and are on track to pay off almost another $1K before the year is over — and we haven’t incurred any additional debt, so we are making excellent progress! Paying these down is one of our top financial priorities, as we are unsure if current promotional rates will continue indefinitely in the future.
I have approximately $70,400 in student loan debt from my undergraduate and graduate degrees combined:
Private loan 1 (undergrad): $19,200 at 5.75 percent
Private loan 2 (undergrad): $2,300 at 3 percent
Private Loan minimum payment: $268.61, actual payment: $300.00
Gov’t loan 1 (grad): $22,800 at 5.16 percent
Gov’t loan 2 (undergrad): $1,700 at 6.55 percent
Gov’t loan 3 (undergrad): $2,500 at 5.75 percent
Gov’t loan 4 (grad): $21,900 at 5.96 percent
Gov’t loan minimum payment: $251.55, actual payment: $300.00
I pay a little more than the minimum on these right now to help pay them down quicker. The excess payment goes to the loan with the highest interest rate. Since graduating from undergrad in 2009, I’ve knocked off $13,900 of those loans (original principal balance of $39,600 for one year of undergrad). I’m still in the hole for grad school (attended 2013-2015) for about $3,700 of capitalized interest on top of the $41,000 principal balance I took loans for.
I attended community college for my first two years of undergrad on a full scholarship and worked full time in retail while attending to pay for books, activity fees, etc. I graduated with an Associates in Accounting and transferred to a tier II school. My mother was hit by a car in 2006 (luckily she survived and only has minor lasting damage), and used part of her settlement money to pay for my junior year of college (after lots of back and forth where I felt guilt for taking it in light of how much she suffered, and she felt guilty not giving it because my parents were never in a place where they could have helped me with college before this and she wanted to). I took out loans and also interned for my senior year of college and graduated with a Bachelors in Public Accounting in May of 2009.
I went back to graduate school to get my Masters in Taxation in 2013 because I needed 150 credit hours to be able to be licensed as a CPA in my state. I attended a tier I school via their online program, which ended up costing me premium dollars but it was the best alternative at the time for a variety of reasons. I graduated in 2015, and didn’t receive any kind of pay bump from my employer. The degree only “paid off” now, two jobs later, as the specialized masters degree was the primary reason I was hired. The plan was to get my CPA right after, but life happened on a celebratory “yay! I’m done with grad school!” trip to the Dominican Republic (hello, first-born child!) and there is no pressure from my current employer to rush to get this.
Aside from retirement savings, I have a “liquid” savings account, a small emergency account, and we have a joint emergency savings account. My husband is the dedicated “saver” in how we handle money right now while I focus on paying down our debt. Our main financial goal right now is to build up a savings buffer while we simultaneously pay off debt.
I just recently started depositing $300 per month in my “emergency” account (current balance: $600). Eventually, I will transfer this money over to our joint savings. Honestly, there’s really no reason to have it separate. The plan is to not touch this money, unless it is needed to pay off a 0 percent APR balance — and even then, I would consult with my husband before I pull the money to do that to see if it makes sense.
My husband is the sole contributor to the joint account. It has about $8k right now which would float us for maybe 1–3 months of expenses depending on how we pare down the budget. He contributes around $500/month here.
My “liquid” savings account (current balance: $100) has two functions: saving for large expenses that I know are coming, and debt payoff. Whatever is left in my budget after I budget out my variable expenses goes here. It can be as little as $0 per month when I have a 0 percent APR balance expiring (like last month), or as much as $650 a month when we have no unusual variable expenses.
I feel like we’re your “average” middle class couple. I also feel like we’re struggling. I earn six figures, but after taxes, benefits, retirement, savings, debt repayment, and monthly expenses, there’s maybe $250 left over — and that’s on a good month, when we don’t have unexpected expenses that prevent us from hitting our savings goal. When I took out the loans for college, at the time, I thought “oh, at $100,000+ in salary I should be able to pay back a $40,000 loan in like, a year!” and that obviously hasn’t been the case.
I know we’re fortunate to earn enough to make savings and debt repayment a priority. I still feel like I should have it more together than I do, and it leaves me wondering if I’m still making poor financial choices, or if I’m a part of that “squeezed” middle class. Or, maybe, it’s a combination of both.
Michelle is a thirty-something, color-coding, tax accountant wife and mom who is just trying to do the best she can with what she has. Send lattes and help!
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