Since our move back to Michigan, our budget and finances have changed for the better. I wanted to highlight a few of these changes in this post.
I was at Sandia for about two years and they offered a 401(k). Sandia automatically contributes 6% to the 401(k), even if I don’t elect to put anything in it. in addition, if you contribute 6%, they will match it by 4%. The total employer contribution was therefore 10%. This is very generous, and I have yet to find another employer that provides such a great match. I wasn’t able to max it out due to our budgeting constraints, but I was able to contribute at least 6% of my salary to it to get the full match. The employer portion also didn’t vest until I had worked for Sandia for 3 service years. Now, the way they count service years is a bit weird, but I was able to meet that requirement in June 2022, after having only worked 2 full years.
I left in September 2022, and decided to rollover my 401(k) from Fidelity to Vanguard. The process was not that bad. All I had to do was go to my Vanguard account online and open a rollover IRA account. From there, I contacted Fidelity and requested a rollover. They sent me a check in the mail. I then used the Vanguard app to snap a picture of the check, which deposited directly to my rollover IRA account. Once the funds were deposited, I chose which index funds I want to buy with the money, since it’s not invested directly due to a change in brokerage. I chose 60% VTSAX and 40% VTIAX, both of which have a small expense ratio of about 0.04%. I’ve set the dividends to be reinvested.
Moving back to Michigan lowered our rent payment from $2350 to $1750, a reduction of $600 in our monthly cost of living. In addition, the cost of water, sewage, and trash went down from approximately $110 to $75. Yearly pet insurance went down from $385 to $239. Car registration will probably reduce from $252 to below $100. The total savings would be $7918 a year.
Of course, some costs went up. These include our internet bill (+$5), car insurance ($289 to $374 every 6 months due to Michigan no-fault insurance), and health insurance premium for my spouse ($292.20 a month for ACA coverage). I do have health insurance coverage through work, but adding my spouse to it would cause an $800 increase a month. So, ACA coverage is what we need to do for now to keep our costs down. In total, our costs went up $3736 a year.
I also needed to buy a set of new winter tires which set me back $471. Seasonal tire change will cost about $60 each time, so that’s twice a year expense of $120. I might go for all-season tires the next time I need new tires, which will not need to be changed out seasonally. I just don’t like the idea of driving in icy conditions without winter tires. So for now, I will just stick with the biannual seasonal tire change.
In total, our costs are reduced by $4061. We do have a few categories in our budget that are still adjusting. Our current unknowns are groceries, food, fuel, and electric and gas. So far, I’ve budgeted $550 to groceries, $200 to fuel (I commute to work 5 days a week), and $150 to electric and gas. Once we have a few more months of data, we will adjust these categories.
My current employer also offers a 401(k), in which they put in 3% of my salary for free, and will match my contributions up to 1%. The 3% is immediately vested, while the 1% match is fully vested after 6 years. With our current budget, I am finally able to max out my 401(k). I can directly invest in VTSAX and VTIAX, so I set up my investments as I did with the rollover IRA: 60% VTSAX and 40% VTIAX. I may opt to add a bond index fund in there.
We’re finally able to save up for a down payment for a house. I want to save up for a 3% down payment and the closing costs. Houses in Michigan are not as expensive as Northern California, but housing costs has ballooned so much. They costs around $300k to $500k, especially in areas with good schools like Ann Arbor, Novi, and Northville. So, we’re saving up $20000 to cover the downpayment and closing costs, and whatever other fees come up.
We’re also rebuilding our emergency fund. It got hit a bit with our move, but we’re close to rebuilding it back to 6 months of necessary expenses.
My spouse is also building up his photography business. In the near future, this will mean we need to purchase a car for him to use, as I commute to work from Ann Arbor to Northville every day. If we do decide to move closer to work, he could drive me to work and use my car for his job. We set aside money for the car downpayment, and it’s just sitting in our saving account until we figure out what to do.
Moving from California to Michigan lowered our costs significantly. I am now able to max out my 401(k), and we can finally save up for our house downpayment. I feel optimistic about our financial future, as I believe we’re on the path to financial independence. It might not happen very quickly, but reaching financial independence takes a lot of hard work and patience.