$1,300 Car Payment but Wants to Retire Early | Millennial Real Life Budget Review Ep. 40

Hey guys, welcome back to another episode of Millennial Real Life Budget Review. Here we are going to be reviewing a millennial's budget who has $1,300 car payments every single month but wants to retire early. So, let's take a look. Hey guys, I'm your host Justine of the DebtFree Millennials channel. I am just getting back from a really long maternity leave. It has been a hot minute since I have reviewed one of your budgets. This is one of the best things that I love to do is I get to take a look at your budget, review it, and offer you some free advice and guidance on how I would work things around to help you achieve more financial confidence that leads to, I don't know, more fun and fewer payments. So, let's get into this application because it's a little conflicting to me. So, the first thing I asked them is what do you do for work? They are a data scientist and their husband is in manufacturing. Their annual salary is the data scientist makes $153,000 per year. Manufacturer makes $65,000. They hail from the great state of Maryland. I love Maryland. Maryland's so diverse. So much fun. Uh spent a lot of time there actually. So what is the biggest thing that they struggle with financially? They answered, "We had a financial transformation recently. We were struggling with the feeling of where is all our money going. The net differences on the financial inventory page look good, but what is not reflected is we finally started paying our credit card off fully in February. Before that, it felt like our credit card bill would rack up a balance, and we were not tracking how it would get there. For context, most of our bills run through our credit card, so we always expect the balance to be around $4,000, but it would be much higher than that. So, it sounds like they're just not in alignment with what they're actually spending on the card and maybe there was a balance left over prior to them kind of changing things around earlier this year. We'll get into that inside of their budget. The next question is, what are your top two to three financial goals that you want to accomplish? They answered number one, we are planning for my husband to quit his job in April 26 to go to school full-time. So, the goal is to live off my paycheck and have enough saved up for half of his remaining tuition, which is about $15,000. I'm curious, what is your husband going back to school for? The second goal, they said, is to retire early using Projection Lab, which is a financial planning simulator tool that I use with all of my coaching clients. I also use it for myself. Love this tool. I'm going to show you what it looks like on the inside. It is said in projection lab we would reach financial independence by age 3840 but I have a hard time understanding that. Also when we think of retiring early we think of taking part-time jobs or jobs that would make about 50% of our income but have more time to travel or possibly move overseas. Love that. And number three travel. We love traveling and have three international trips planned next year. One nice thing about our planned travels is our housing is mostly tent camping and we are budget flyers. So, we don't typically splurge on flights or accommodations. Wow. I would love to know where you are camping internationally or how you're finding these like camping spots. Are you part of a group or something? I I would not know how to do that. Okay. So, they have $56,382 in debt from two cars, guys. Okay. How much do you have in savings for an emergency fund? They said $12,74512. Part of that is husband's tuition savings. So, it's sounding like they don't have a fully funded emergency fund at this point. All right. Anything else they wanted to share? And they did. They said, "When my husband quits his job, we will be losing his $65,000 salary. Prior to that, I will be finishing my masters. I expect my gross salary to increase between $180 to $215,000. Man, if y'all want to make some money, be a data scientist. Also, my husband's paychecks fluctuate between $15 to $2,200 just depending on how much overtime he works. So, we always plan on $1,500 per check. We started investing one of his paychecks per month and putting the other paycheck into savings. Wow. So, they're not even living off of his income. We are investing into a 2045 target date fund because that's when we would like to be financially free. Also, my HSA or health savings account contributions automatically invest into a 2065 target date fund. Interesting. Hm. I drive a 2023 Tesla Model 3. Here we go. That's $763 a a month payment. My husband drives a 2021 Volkswagen T1. Also, I was playing around with debt payment calculators today and thinking about lowering our taxable investments to pay these off quicker. The Teslan loan ends in 2030. It's a six-year loan with a 6.69% interest. And the Volkswagen ends in 2031, 7-year loan, 8.99%. Yo, I didn't even realize that car loans were being on a 7-year term. That's crazy. um they want to move overseas, live a more nomadic lifestyle eventually. So, they don't think they'd live in their current house, but could keep it to rent it out or sell it. They have five investment accounts, three 401ks, one is a TSP. Let's just let's just get into the budget and I'll show you what this looks like. All right, so this is a look at their budget. Oh my gosh. Okay, so they've got the cars and this is adding up to 13 over $1,300. They plan on a $10,000 income month and then they've got about between five and 6K of expenses. So really, I guess that's including the mortgage. So, let me wh let me take a look down here at the bottom. Yeah, they were planning on doing about $4,000 on the credit card. So, they're not too far off of that from the planned budget. It looks like, wow, looks like their cell phone bill is actually really high. Even for two lines, if they really have two lines, that's roughly $80 per line. I think they could do way better than that. Something that you could switch to is Mint Mobile, which is only $30 a month for an unlimited plan if you want to check out. I'm an affiliate for them, but I also use them and I've been using them for several months, several months, several years, and I absolutely love them. So, check that out below if you want to save on that and also tap into the T-Mobile network. That's a no-brainer. Their utilities look great. Groceries looks about on par. Gas is high, but assuming they're both traveling for work, so that's okay. Car insurance is insane. $443 a month for car insurance. Ah, but we have the Tesla and we also have the Tiguan. I would re and you also have the car loans on both of them, which means you need full coverage. I would really take a hard look at your deductibles. If your deductibles are set at zero or even $500, now is the time to increase the deductible to lower your premium amounts. If you don't know what I'm talking about, you can check out my uh video on car insurance. It's an oldie but goodie. And I think that's going to help you navigate your policy to take a look at how you can change your coverage so that you're getting a lower premium because that is insane. Unless you have a really bad driving history, tickets, DUIs. Also, Maryland is just more populated. If you live in a bigger city like close to DC, maybe you live in Annapolis. Annapolis is not that big, Baltimore. Um, those things could definitely impact your car insurance premiums. Restaurants, it looks like you went way over your budgeted amount. You had $400 and you actually spent $780. Shopping looks good. You don't spend any money on clothes or haircuts. Maybe not for this month, but surely later on down the road, you would be spending some money on that. And then you're putting about three grand into vacation and investing. So, here's the thing. Here's where I'm getting conflicting information from you is that you are interested in paying off your cars early. However, you also did say that when you want to retire early that you want to live this more nomadic lifestyle and be able to travel. You can't take the cars with you. So, I'm curious. Does it make sense in your brain to pay off $56,000 of car debt when you can't take the cars with you to go travel this nomadic lifestyle and realize the potential of retiring early and being able to kind of like just go by the seat of your pants and fly to all these really fun places. I don't know if that makes these two cars worth keeping. So, I would take a good look at that. If if truly we're talking about financial independence and retiring early and travel is a big part of that, then I don't see the emphasis on holding on to these really expensive cars. I want to head over to your projection lab because this was kind of eyeopening to me as well. So, they currently have a net worth of $228,000. So, I was just taking a look at some of their finances, their investments. They have about 120,000. Savings is 12,000. This is another thing. Let me go back to the budget real quick because you guys definitely need more money in your emergency fund. So, if I was to add up all of the key things that are would be included for basic living expenses, we're looking at about $3,600 for one month. So, that's 3600 times 6 because that would be a fully funded emergency fund for you is about $21,000, $22,000. That's what I would be striving for. But first, before we really build up this robust emergency fund, I I really want you guys to have a hard conversation about whether or not these cars are worth keeping. Because gosh, imagine what you could be doing with the extra $1,300 if you didn't have a car payment. You're already investing heavily into the stuff, but you're also putting a bunch of it towards debt. So, I just feel like some things are a little backwards here. A starter emergency fund for you would be the $3,600 time three, which would be 3 months of savings for you is about $10,000. So, you do have that much at least in the savings account. And I think you said on your application you had you needed 15,000 for your husband's tuition. I currently don't see any savings goal for that inside of your budget. So really the vacation fund or the investing fund, one of these needs to change to reflect building up your husband's tuition amount and then be done. So we're really looking at 15 plus the 10. I need about $25,000 in savings, which you could totally do if we just even temporarily paused the vacation and investing accounts. So that's the 3K divided. Yeah, it would take us about eight months to build up the starter emergency fund and have a fully funded goal for the the tuition for your husband. Okay, so I'm just editing this video and realized that I got the math wrong. So, they already had the $12,745, which means they only needed $12,255 [Music] more to get a 3mon starter emergency fund and the husband's tuition. So, it's only going to take them 4 months to hit that goal if they reallocated the vacation and investing contributions over to their savings. Hey guys. Okay, so I decided to re-record this section. And I've filmed it once before, but then I was like, I feel like I'm missing stuff. So, I went ahead and created a second plan for them. The June 2025, this is their plan currently. And this is where they were like, m, I don't know if this is right. So, I went ahead and created Justine's plan for you, and this is what it looks like. So, what I did is I just changed how the income was structured. Basically, I took this manufacturing job at 65K and I had this going from right now, let me change that to now to retirement. Save. And then I also included, let me go back to this. I also included switch to part-time for a while. And the part-time work would look like this. 50% of their income starting at that financial independence year all the way to age 60. And then I said at age 60 you guys are going to be stopping work altogether. I did that for wifey's salary. So starting now making 153 to the end of retirement. I also put down here switch to part-time work for a while starting at the retirement or basically when you reach financial independence because that's all happening in the same year and I did that as 50% as a as well also changes over time I did advanced because you were you did tell me that you were expecting an increase in salary after your masters. So I just put here's what it is now 153 after you finish your masters. I didn't get an end date, but I'm assuming in the next year, let's bump up to 180. And then I said in 5 years, bump up to to 200. Obviously, that could very well change. And you can change the scenarios. So, I went ahead and did that. Click done. Click save. And I just simplified how the income was structured here. Okay. So, then we're going to take a look at the chart and see how that is all put together. Also, you had in your plan that you wanted to maintain $50,000 of savings. I thought that was a lot. So, I actually put it down to $25,000, which was more in line with what I said your sixmon emergency fund should be. So, that's included. Also, not doing anything with the cars, keeping the cars, you're going to be paying it off in just a couple of years. So, again, it's a conversation you can have. But when I'm looking at it bumped up against the total uh plan for your finances, it's not making a dent, right? So in 2035, you create livable passive income, which is really amazing. And then after that, here's where we start to look at financial independence, which is happening in your early 40s here. This is where we're switching from full-time work to part-time work. Also, during that time, I also included the start of health care because you're no longer going to be working full-time for your employer. I'm assuming that you're not going to get those health u benefits. So, you're going to have to switch to private health insurance or health insurance on the marketplace. I average that about 1,600 a month for the two of you. So, that's $800 a month for the two of you if you're healthy and young. You can do your research on this and figure out what exactly that that average cost is. I just Googled that real quick to see how much private health insurance is for a family right now. It's around $24,000. But because it's the two of you, that's why I I chose $1,600. Also had you guys start additional foodie expenses since I feel like this is an area you like to spend money on. So I put that as 600. Did I put that as $600 a month? Let me take a look. $500 a month, which is the $6,000 annually. So, I included that here. Your living expenses, I bumped up to $7,000 a month because based off of your last month's budget, you were spending about $6,500. So, I conservatively bumped it up to 7. And then I included your travel expenses as as well along with the healthcare. So, you're going to see everything listed out here in the icons. And then you can see where that part-time work is ending in your 60s. Okay? So, I ended your final health care expense here when you reach the age of 65 because then you'll go on to Medicare and then your health insurance would be paid for. You might have out-of pocket expenses by that time. So, we could also run that as a another scenario of just medical expenses. And then we could start that. Let's say we just start that in your 60s when our bodies are so old. Sorry for all you 60 year old plus people watching. I'm just joking with you. Okay, let me go down to 60s. And I'm just doing a conservative 5K a year. Very well. Could be more, could be less. Not really sure. Okay, to end of plan. All right, this also assumes that you never sell your house, that you never buy another car. you're going to want to add in those scenarios and run that as well. That's going to change things, but not enough for me to really point that out in this plan. So, I'll let you guys do that. But here's where you start your required minimum distributions for those 403 403bs, 401ks. And as I'm taking a look at your net worth, it's not too far off from what you guys had. It still continues on an upward trend. So, I'm really pleased with this. I think if you continue to live like you're living and you want to continue with the way that your income is moving and investing a lot of it, I think this very well could be feasible for you. You can also hit this uh chance of success. So where you run a statistical uh simulation called the Monte Carlo simulation to see what your plan's chance of success is bumped up against historical data. So let's go ahead and run that. Okay. 100% success rate. Seriously. So, basically 97.9% of the trials bumped up against this plan had a success rate. Uh you also had 2.1% who had a comfortable and sizable legacy and never ran out of money. Either way, if you stick to what you're doing now, you guys are going to live a great retired early life. Honestly, everything else that I saw inside of your budget looks really good. You're really not spending any money on the fun stuff. Let's be honest, though, are we? Let's be honest. And take a look at what you're actually spending every single month for fun things and then input it. Maybe it truly is just eating out. But I'm curious, when you're traveling, what are you spending money on? You said you're cheap on accommodations, cheap on um on your flights, but are you really splurging on things like restaurants or different like tour like tour type things? Are you doing excursions? Maybe we need to tie that into projection lab and tie that into what we're doing here. I would be curious if you're keeping a vacation budget log of how much you're spending when you're on your travels. All right, so that was a look inside of this millennial Maryland couple's budget. They want to retire early. They've got hefty car payments. I say it's time to get rid of the cars and go with something cheaper. If you would like your budget reviewed for free and anonymously with no hate, maybe a little bit of judgment, but definitely kindness and compassion, fill out the application below. The more information that you can give me, the better advice that I can give you. If you want to take this further and you're like, I just want to chat with Justine about getting some guidance for real, then check out my signature financial coaching program. I will leave a link to that below. And I'll catch you in the next episode. [Music]