What to do with 10k raise

Submitted by MyLittlePegasus87 t3_10q0elh in personalfinance

Edit: Thanks, everyone! I increased my 401k savings to 11% which is about 10k a year. And I will be putting 60% into joint savings while hubby puts 40%. We also briefly talked about me putting in more for bills, though we need to figure out how much more I'm already putting in (as I often buy the food or pet supplies)

I was expecting a 5k-10k raise, and was happy when I signed the paperwork for 5k. Well imagine my surprise when another paper came to sign for an additional 5k.

I currently get the 4% match from my employer and max out my Roth IRA. Back then it added up to 15% (including the match). Now with the increase in IRA limits, it adds up to about 14.8%

My husband and I have a lot of short term goals. We'd like to go on a few international trips and also buy a house. We are newly married, so we haven't combined our finances completely yet. We have a joint HYSA that we put money into 50/50 for our goals, but everything else is mostly separate. Now with the raise, I make significantly more than he does. I'd like to save more than what we're putting in now, but that would be a struggle for him.

Should I increase the amount I'm saving in my 401k? Or should I put it in an individual HYSA for liquidity? I don't mind paying more for daily expenses (I already do) and for the vacations (after all, it's my family and my friends we would be visiting), but maybe an emotional part of me feels like the house purchase should be equal.

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wickedkittylitter t1_j6n518m wrote

My best advice is to get over the idea of my income and his income when it comes to paying bills and savings goals. The same for the 50/50 contribution to the HYSA for goals. The same for who contributes what amount for a house purchase. If you must continue to contribute using a percentage method, use the method of who makes what percentage of income. If you make 60% of the total household income, your contribution needs to be 60% of the total goal amount, not 50%. Your husband's contribution would be 40% of the goal.

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nails_for_breakfast t1_j6o3no9 wrote

Yeah my wife and I just get our paychecks deposited into our joint bank account and then transfer out a set equal amount to each of our own accounts for our discretionary spending. Feels more like our finances are a team effort and everything is more transparent that way, but we still have the freedom to make a silly purchase here or there without asking for permission

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MyLittlePegasus87 OP t1_j6ojlzz wrote

I like this idea. I could go for it, but I'll see if I can convince hubby.

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MyLittlePegasus87 OP t1_j6n6365 wrote

I suspect this is more of a him problem than a me problem, though I struggle with it, too.

For example, I suggested that now that we are a team, maybe we should give a heads up when making a large purchase. My threshold for a "large purchase" was $300 and he didn't think we should need to tell each other unless we were purchasing something $5000 and above. Also I only just got him to give me visibility into his accounts last night so that we could come up with a budget.

Like I said, we are newly married (a few months) so we are slowly trying to wrap our heads around everything being joint.

We just started having nightly check ins and weekly budget discussions, so I can bring up the idea of me putting it more, based on our percentages of income.

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dmaxd123 t1_j6n7jw1 wrote

normally i would say just throw all the funds in one account and call it good. once that spending issue is cleared up and everyone is on the same page, then it can just be a simple all in throw the money in one account and be done but until then i think transparency but discretion.

unless he has a lot in his separate savings account the fact that he thinks spending the whole joint account without warning is a bit concerning financially.

since you have a house & other short term goals I would just put the bonus in a HYSA. you have enough in savings for the short term so if you say the house is a 7-10+ year goal to purchase then there is nothing wrong with a brokerage account to roll the dice that you can turn the bonus money into a bit more

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MyLittlePegasus87 OP t1_j6n8054 wrote

He does not. I have slightly more in savings than he does, but we're not too different. I think it's the shift in mindset of being independent for the first 14 years of adulthood to suddenly being a team that we are grappling with.

Yeah, I'm thinking the HYSA is the way to go right now for the liquidity. And the rates are not bad right now!

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The_Blue_Tears t1_j6nvcl8 wrote

I think talk to your husband about the house if you feel it should be equal. You can both come up with half the down-payment, just in different times, unless you match his contributions. But, what about the mortgage? will you split that equally too? Just something to think about

As for everything else, I think go travel than figure out whether you want to max out your contributions. You have a rental property too, which in about a decade or so will be paid off, if I ran the numbers right. Assuming you keep the same rent (which you could probably increase at that time) and pay (which will likely be more in that time), you'd be making an annual income of 114,200. At this point, if your husband's pay hasn't changed either and assuming it's around the 85k ballpark, you're making 57% of the money. You haven't told us his income, so you can run the numbers using that instead and see whether your percentage changes substantially or not.

Note that you will have to include property taxes and a small reserve for any maintenance required for your rental. I'm assuming the prop. tax is handled with your current mortgage, but I don't know where you live so I can't adjust your income for that.

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MyLittlePegasus87 OP t1_j6o1fwf wrote

Hmm. We're about 61/39.

Now that I see the numbers, it doesn't seem fair to split 50/50 although that's what we did prior to getting married, and we had a lot of changes happen last summer. I started earning more and simultaneously, he took a pay cut to get into an industry where he will eventually get paid more than me. But he's still entry level right now, so it'll take a long time to get there.

And yes! All the excess money from rental income stays contained in my checking/savings combo that is only used for that property. I don't touch it at all, but it's there in case any maintenance or repairs need to happen.

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NeighborhoodAliCat t1_j6o28sa wrote

How old are you if you don’t mind me asking and do you live in a HCOL area?

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MyLittlePegasus87 OP t1_j6o2fg8 wrote

We're both 32, and I'd say we live in a medium to HCOL. We live in California, but not like San Francisco expensive.

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Nickyweg t1_j6n28t1 wrote

What’s your income?

How much in savings ?

Any debt ?

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MyLittlePegasus87 OP t1_j6n2xtd wrote

Income: 95k

Savings: About 30k by myself, 6k in the joint (I seeded 3 and he seeded 3)

Debt: I have a 14k car loan at 0% interest for 6 years.

I have about 135k left on a mortgage of a house I owned prior to marriage. It's being rented out to tenants at a rate ($1600) that exceeds the monthly payments ($1050). This house and income are being kept separate from our joint finances and I have no plans to ever sell.

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Nickyweg t1_j6n4s0h wrote

Any retirement savings ?

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MyLittlePegasus87 OP t1_j6n4y66 wrote

60k in my Roth IRA. 7k in my 401k (I've been with this company a long time, and they only started it last year).

I know I'm a bit behind here.

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[deleted] t1_j6n7itc wrote

[deleted]

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MyLittlePegasus87 OP t1_j6n8jbo wrote

I'm not sure what you mean here. Put 3250 into one Roth IRA and then 3250 into another Roth IRA?

Also I've already been maxing out my Roth for years, so I don't think that would change much as far as how I'm saving.

Or do you mean like doing a backdoor conversion of some kind?

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