This story is part of CNBC Make It's Millennial Money series, which profiles people around the world and details how they earn, spend and save their money.
Marissa and Jacob Lyda lounge in their minimalist but homey living room. Wedding photos hang on the walls and a Christmas tree sits in a corner opposite their couch. It's December, and the new homeowners just moved in a couple months ago, but you wouldn't be able to tell. Marissa's home office, where the 25-year-old films her YouTube show, is outfitted with a tripod and lights. Jacob, 28, has transformed the garage into a workshop. And their nursery is filled with onesies for the baby they're expecting in May.
"It feels awesome to be homeowners," says Jacob. "We saved and saved and saved."
It's especially satisfying because the couple spent 14 months living with Marissa's mom in 2016, when they were tackling $87,000 worth of student debt.
The couple, who met at Corban University in Salem, Oregon, and got married in July 2015, paid it all off in two and a half years, mostly thanks to their living situation. They still paid Marissa's mom some rent — $200 a month — "but it allowed us to dump almost all of our income, after paying insurance and paying all of our other expenses, to debt," says Jacob.
After becoming debt-free in 2017, they celebrated with a Caribbean cruise and moved into their own apartment, but their lifestyle didn't change much. That made it easy to save for a home, adds Jacob: "We were already in a very frugal mindset because we had come off of paying down so much debt." Rather than upgrading their lifestyle, they redirected the money that previously went toward their loans into a house fund. These days, they save close to half their income each month.
Even while paying down debt and saving for a home, the Lydas never felt like they had to make big sacrifices, says Marissa. She credits her mother, who raised Marissa and her sister on her own, with instilling in her smart money practices. "We didn't have much, but we still really enjoyed our childhood because she managed her money really well," says Marissa. "Learning from her has inspired me to be really cautious and conscious of my budget decisions."
In the fall of 2019, after saving a little over $20,000 for the down payment, the couple closed on a $428,000, four-bed, three-bath house in Portland, Oregon. Today, with a baby on the way, they have shifted their financial priorities with a goal of saving a $25,000 emergency fund.
They don't feel stressed by their ambitious money goals: "I think that we're definitely living a comfortable lifestyle with the salary that we have right now," says Marissa, pointing out they were able to buy a home as well as set aside money for retirement and other savings goals. Combined, she and her husband earn $124,000 a year.
Here's a closer look at how they budget their six-figure salary in Portland.
Marissa earns $45,000 a year working as an accounting manager for a non-profit. She works four, 10-hour days — Monday through Thursday — and spends the bulk of Fridays working on her side business, The Budgeting Wife, which has evolved from a blog she started to document the process of paying off student loans into a personal finance brand.
"I initially started my YouTube channel and blog as something that I could just do for fun and as a hobby, but then learning that I could make money from it was a huge added bonus," she tells CNBC Make It.
It took a year and a half to start monetizing her platforms, but today she has more than 33,000 subscribers on YouTube and makes about $27,500 a year between The Budgeting Wife and freelance video editing projects. Her business expenses run low: $400 per month. She spends $200 on monthly subscriptions and equipment, and puts $200 toward a business savings account for any big, future purchases she wants to make for her company.
Ad revenue is a relatively easy way to make money with a blog and YouTube channel, she explains in one of her online posts: "You get paid when people engage with a placed ad on your platform. Usually, the more views you have, the more you make with this revenue stream."
Plus, she makes money from affiliate links: "It's pretty passive and while you can make more money if you have more views, you don't need a huge audience to make money from affiliate marketing."
The bulk of her side hustle income, though, comes from selling budget templates on Etsy for $7. "It is a product that I created once and benefit off of time and time again," she writes on her blog.
Jacob works in product marketing for a software company and makes $51,500, putting their combined total income at $124,000. They live comfortably, but earning more is "always something to work toward," says Jacob. "It would be nice, especially since we have one child on the way, and if we decide to have more children."
Here's a look at how the Lydas budget their income. These numbers reflect their spending activity as of December 2019.
Their mortgage is $2,398 per month. That includes principal, interest, taxes, insurance and PMI (private mortgage insurance), since they didn't put 20% down on the home.
They combined their finances right after they got married and so all their expenses are paid for out of a joint account. "Everything that we make, whether it's from Marissa's side business or our day jobs, all goes into one account," says Jacob.
It simplifies things, adds Marissa: "It's just our money, all together, and we use it for household expenses, fun expenses and savings."
Marissa and Jacob started setting aside a portion of their income for donations as soon as they got married, even when they were still paying down debt. Today, they give back 10% of their net income, which comes out to be about $750 per month.
They donate to their local church, plus they set aside money for any "extra giving opportunities that come up," explains Jacob, "which could just be paying it forward at a drive-thru. Or, maybe someone's going on a mission trip that we can give money to."
The Lydas used to spend closer to $300 on food per month, but, "since becoming pregnant, it's grown to about $400," admits Marissa. "I have a few more cravings."
They spend roughly $300 on groceries and another $100 on restaurants. Most of the time, they cook most meals at home and pack their lunches to keep their food bill low. When they do go out, they like to take advantage of happy hour deals: "The portions are the perfect size, and it's also less expensive," says Marissa.
Each month, both Marissa and Jacob get $100 for personal spending. It's something they started when they were in the red, says Jacob: "When we were paying off debt, we realized how important it was to still have a little bit of money to spend on what we wanted."
Originally, they got just $25 a month, but now that they're debt-free, they bumped it up to $100.
"It forces each of us to manage our own mini-budgets," says Jacob, who typically spends his money on new tools for the garage. Marissa has used her personal spending money to buy some electronics and for "Target runs that I'll go on that aren't necessary at all but are just fun for me," she says.
The Lydas drive used cars — a 2013 Toyota Corolla that cost $7,500 and a 2006 Honda Pilot that cost $3,000 — that they were able to pay for in cash in 2019.
Gas runs about $150 a month. They save on basic car maintenance procedures like oil changes, which Jacob can do himself in their garage.
Owning a home means a bigger utility bill. Here's a breakdown of how much utilities, homeowner fees and Wi-Fi cost per month:
- Homeowners association (HOA) fee: $121
- Hot water: $100
- Electricity: $40
- Wi-Fi: $40
- Trash fee: $36
- Heat: $35
- Insurance: $331 (health, dental, vision, car and life insurance)
- Miscellaneous: $256 (household items including decorations and cleaning supplies, entertainment and Disney+ subscription)
- Phone plan: $115 (for two phones)
The Lydas save about $4,115 per month, nearly half of their income. Here's the breakdown of where their savings go:
High-yield savings account: $2,340
The couple save $2,340 in a high-yield savings account, which used to be their house fund. Now that they've bought their property, this account acts as an emergency fund. Their immediate money goal is to build it up to $25,000. When they moved into their home in September 2019, it was at about $10,000.
Retirement accounts: $800
They contribute 9% of their combined income, about $600 per month, into their employer-sponsored retirement plans (Jacob has a 401(k) and Marissa has a 403(b) plan).
They also put $200 into a Roth IRA. Between the three accounts, they have about $30,000 saved for retirement.
Health Savings Account (HSA): $530
Jacob's company offers an HSA account, which gives him a triple tax benefit: Contributions are tax deductible, earnings grow tax free and you can withdraw money tax free if it's used for qualified medical expenses.
The Lydas are working toward maxing out the account by contributing about $530 a month. In 2020, the contribution limits are $3,550 for individual coverage and $7,100 for family coverage.
Bank savings account: $445
The Lydas keep money for their potential future costs, including vacations, gifts and car maintenance, in their standard savings account. They put $445 a month into this account.
CNBC Make It asked Fred Egler, certified financial planner at Betterment, to comment on what the Lydas are doing right with their money and where they could better optimize.
Their high savings rate classifies the Lyda couple as "super savers," says Egler. "They're saving almost 40% of their income. That's a really high and impressive percentage."
How much you should be saving really depends on your specific financial goals, emphasizes Egler, but "a good rule of thumb is to try and save between 15% and 20% of your income in your 20s. They're blowing that out of the water."
It helps that Marissa has figured out a way to turn a hobby into an additional income stream. Diversifying your income with a side hustle is great for a couple of reasons, says Egler: One, it can help you earn more and be more financially fit. Two, it can be fulfilling to work on projects that interest you outside of your day job.
Egler recommends the Lydas create a specific savings bucket for their first child. "Obviously, raising a child throughout their life will increase their expenses, but just giving birth to a kid can also be really expensive," he says. It costs about $12,000 to give birth to a baby in the U.S.
They should also consider opening a 529 savings plan to get a jump start on saving for education costs. "If you invest in a 529 account, the investment can grow tax free," explains Egler. "If the money is used for qualified education expenses, the distributions are tax free, too."
Plus, a lot of states offer a tax deduction if you contribute to a 529, including Oregon, where the Lydas reside, he adds: "Not only do they get tax-free growth on investments and tax-free distributions for using the money, but they can get a tax savings upfront on their state income tax if they make contributions in Oregon."
Health savings accounts, which you can only contribute to if you have a high-deductible health-care plan (HDHP), provide a lot of flexibility. "You can use that money for qualified medical expenses tax-free," explains Egler. And "way down the line in retirement, if you're 65 or older, you can actually use the money in those accounts for anything penalty-free.
"They're a great way to sock away savings for retirement if you can hold off on using that money and if you can pay for current medical expenses out of pocket."
HSAs can act as a powerful retirement-savings tool because they offer a triple tax benefit:
1. Your contributions are tax deductible. As with a 401(k), you contribute pre-tax dollars to an HSA, and you get a deduction whenever you make a contribution. Deductions reduce your taxable income, which could place you in a lower tax bracket.
2. Your earnings grow tax free. When you contribute to an HSA, you can invest your funds, and whatever interest you earn is tax free.
3. You can take the money out tax free if you use it for qualified medical expenses. If you're withdrawing the funds for qualified medical expenses, which include things like co-payments, flu shots, physical therapy, you get to take it out tax free.
If you're over age 65, however, you can make withdrawals to cover non-medical expenses. The 20% penalty is waived and the distribution would just be taxed at your regular rate.
If they haven't done so already, the Lydas should invest the money in their HSA account if they don't plan on using it for medical expenses, Egler says. He recommends putting it in a long-term investment portfolio, where it could grow over time and act as a nice additional retirement-savings account.
Once they build up their emergency fund, the Lydas want to focus more on putting their money to work.
"Our investing philosophy right now is just to start," says Marissa. "Even when we were paying off debt, we put in at least up to what our company match was [in our retirement accounts] because we knew that having a lot of time is really beneficial in saving for retirement."
What's your budget breakdown? Share your story with us at email@example.com for a chance to be featured in a future installment. We are especially interested in hearing from first-time homebuyers.
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