Case Study: One-Income Family of 3 Looking to Save More

[catccc]

My family dropped from $100K to $25K so I could stay at home for our first kid's first year.  After that we switched, DH became the SAHP and we were a one income family earning $70-80K for several years.  He started part time work when our youngest was about 3.5.  Learning to live on one income is a great start.  Many people have already pointed out on ways you can cut down.

I've seen the cloth diapering suggestion, but I'm going to take it a step farther and suggest Elimination Communication.  It seems like a lot of work, but just stick with a regular schedule (once baby is in a routine) and it is super easy and makes cloth diapering super easy.  We paid $200-$300 TOTAL on cloth for our two kids, and that included what turned out to be unnecessary fancy cloth diaper purchases.  Also, people think you are magical when your 3 month old is poo trained and you don't need to change poopy diapers ever.  And going from cloth to potty trained at one year old usually means you get a 2nd year out of clothes that still fit because your baby lost a lot of diaper bulk when potty trained.

Good luck!

[Sweetpotatofries]

My family dropped from $100K to $25K so I could stay at home for our first kid's first year.  After that we switched, DH became the SAHP and we were a one income family earning $70-80K for several years.  He started part time work when our youngest was about 3.5.  Learning to live on one income is a great start.  Many people have already pointed out on ways you can cut down.

I've seen the cloth diapering suggestion, but I'm going to take it a step farther and suggest Elimination Communication.  It seems like a lot of work, but just stick with a regular schedule (once baby is in a routine) and it is super easy and makes cloth diapering super easy.  We paid $200-$300 TOTAL on cloth for our two kids, and that included what turned out to be unnecessary fancy cloth diaper purchases.  Also, people think you are magical when your 3 month old is poo trained and you don't need to change poopy diapers ever.  And going from cloth to potty trained at one year old usually means you get a 2nd year out of clothes that still fit because your baby lost a lot of diaper bulk when potty trained.

Good luck!

We've looked into EC actually but have a hard time imagining how it works. Nevertheless once we have the feeding and sleeping stuff down, you're right that it could be a game changer. Did you find a particular website/book/group of people helpful for figuring out the how's of EC?

[mamagoose]

Have you ever considered teaching exercise classes at the YMCA? You're athletic already and want to make new friends, they will watch your kids, and it gives you a little $$$. I had PPD after my baby was born and stroller walks were just not enough, I couldn't get my mind clear and my heart rate up while worrying about her needs too, so I found a studio with childcare and went every day. Now I'm an instructor and it's awesome. We've both made great friends (adults and kids).

[MayDay]

Have you ever considered teaching exercise classes at the YMCA? You're athletic already and want to make new friends, they will watch your kids, and it gives you a little $$$. I had PPD after my baby was born and stroller walks were just not enough, I couldn't get my mind clear and my heart rate up while worrying about her needs too, so I found a studio with childcare and went every day. Now I'm an instructor and it's awesome. We've both made great friends (adults and kids).

This is actually a great idea, because even if it is an expensive place, instructors probably get free memberships.  Even if you had to pay for childcare, it may work out well.

My yoga teacher used to teach at lifetime fitness.  Her kids are teenagers now, but when her youngest was 18 months old, she "loved" babies. And she showed her affection by biting them.  So they bring her daughter to her in the middle of teaching a class and she says "No biting!".  And she is not welcome back to childwatch!

[KBecks]

I started teaching fitness classes when my youngest was a baby.  It's not that expensive to get started a a fitness instructor, you will need to take some workshops and ideally a certification class, but it may take a little while to network into your first position. It is a great part time gig, not a lot of money but great for getting out there.

[researcher1]

No one lost anything in 2008 except folks that over-leveraged themselves or those that panicked and sold when the market was down. Anyone who whethered the storm, (stayed put, and kept making payments) lost nothing, Most home values were back to pre-2008 levels by 2011, certainly 99.99% by 2012.

Housing has gone up in value at least an average of 10% per year over ANY 10 year period since the great depression. It is more reliable than any other investment, including VTSAX. 

I just saw this post on the Bogleheads forum and thought I'd share with those using alternative facts...

Thru this forum my wife and I have finally come to our senses to sell a condo that was a residence turned rental. Was purchased for 320k in 2007 and is probably worth 220k now.

So after 10 YEARS, their condo is still worth $100K less than what they originally paid for it.

[Sweetpotatofries]

Have you ever considered teaching exercise classes at the YMCA? You're athletic already and want to make new friends, they will watch your kids, and it gives you a little $$$. I had PPD after my baby was born and stroller walks were just not enough, I couldn't get my mind clear and my heart rate up while worrying about her needs too, so I found a studio with childcare and went every day. Now I'm an instructor and it's awesome. We've both made great friends (adults and kids).

This is actually a great idea, because even if it is an expensive place, instructors probably get free memberships.  Even if you had to pay for childcare, it may work out well.

My yoga teacher used to teach at lifetime fitness.  Her kids are teenagers now, but when her youngest was 18 months old, she "loved" babies. And she showed her affection by biting them.  So they bring her daughter to her in the middle of teaching a class and she says "No biting!".  And she is not welcome back to childwatch!

I have, actually! I blogged for a bit about gluten free living/cooking and also running, and a lot of people in the 'healthy living blogs world' are either registered dietitians (a lot of extra school + science) or group fitness instructors. Getting certified through NASM to teach some kind of fitness class is something I thought about doing both as a way to get out of my naturally introverted comfort zone, and to make a little $$ if I decided to try freelance writing as a career path since we knew we could live on H's salary and I always wanted to write as a career. I just dropped thinking about it when we decided I'd be a SAHM since there wouldn't be anyone to watch the baby, and didn't think about a gym or yoga studio providing childcare. I'll definitely look into this!

[ringer707]

OP, I agree with other posters that your life insurance is way too high, even for a standalone policy not attached to your job. If you're in good health, it should be much lower. I'm also mid 20s and have a $250k policy for $27/mo through Farm Bureau. I would look into other options on that as a way to cut some expenses.

[BlueHouse]

No one lost anything in 2008 except folks that over-leveraged themselves or those that panicked and sold when the market was down. Anyone who whethered the storm, (stayed put, and kept making payments) lost nothing, Most home values were back to pre-2008 levels by 2011, certainly 99.99% by 2012.

Housing has gone up in value at least an average of 10% per year over ANY 10 year period since the great depression. It is more reliable than any other investment, including VTSAX. 

I just saw this post on the Bogleheads forum and thought I'd share with those using alternative facts...

Thru this forum my wife and I have finally come to our senses to sell a condo that was a residence turned rental. Was purchased for 320k in 2007 and is probably worth 220k now.

So after 10 YEARS, their condo is still worth $100K less than what they originally paid for it.

Thank you!  I'm in the same boat.  Bought in 2005 at $354.  I moved out of it but kept it as a rental when I moved in 2012.  If I had sold at that point, I would not have had enough to put >20% down on my new place, and it would have become a "jumbo loan" at a higher interest rate.  Everyone on MMM has been yelling at me to sell because I lose money on it every month, despite it having been never vacant all that time.  Even now, similar homes are selling for $299.  I'm going to lose a lot of money if and when I sell, but that money has already been lost and I need to get over that. 

[Sweetpotatofries]

OP, I agree with other posters that your life insurance is way too high, even for a standalone policy not attached to your job. If you're in good health, it should be much lower. I'm also mid 20s and have a $250k policy for $27/mo through Farm Bureau. I would look into other options on that as a way to cut some expenses.

That figure is for $1.5 million on H and $1 million on me; we were planning to cut mine to 500k when I stopped work and increase his to $2 million but it would stay roughly similar. I guess we could have less insurance, we were advised that the policies (both a combination of term and whole-life) were typical amounts for younger professionals with our degrees and incomes (I currently have a job making roughly 2/3 of his 190k).

[galliver]

No one lost anything in 2008 except folks that over-leveraged themselves or those that panicked and sold when the market was down. Anyone who whethered the storm, (stayed put, and kept making payments) lost nothing, Most home values were back to pre-2008 levels by 2011, certainly 99.99% by 2012.

Housing has gone up in value at least an average of 10% per year over ANY 10 year period since the great depression. It is more reliable than any other investment, including VTSAX. 

I just saw this post on the Bogleheads forum and thought I'd share with those using alternative facts...

Thru this forum my wife and I have finally come to our senses to sell a condo that was a residence turned rental. Was purchased for 320k in 2007 and is probably worth 220k now.

So after 10 YEARS, their condo is still worth $100K less than what they originally paid for it.

researcher, with your screen name I'd expect you to know that one anecdote/data point does not disprove a statement about averages. Also, you didn't include the location of the poster selling the condo, which would be pertinent to the discussion (specifically, of whether the OP's family's housing costs/choices are unreasonable).

Personally, I find that davef's figures do look optimistic (what if you picked a period ending during the recession?) but I don't have the time or desire to hunt down those numbers right now. However, I do think your argument, as you're making it, amounts to "never buy houses because they might go down in value and then you'd lose money." But you don't just buy a house as an investment, you buy a house to live in, and if you don't buy a house, you're losing money every month paying rent, indefinitely. The details of that rent-vs-buy tradeoff vary on the numbers in the area, and also personal priorities, and risk tolerance(/debt aversion), which we can't properly account for in an equation.

If it makes you feel better, let's not call it "saving" let's call it "debt repayment". This family has already bought this condo and have every intention of staying in it. They already took out the mortgage so they are on the hook for that 424k regardless of what the house value does. They chose the guaranteed 3.6% return on ~$1k of their money by choosing the shorter mortgage (actually slightly more since they got a lower rate by committing to the 15 year) over the anticipated 7% gains in the stock market. You might have chosen differently and that's fine, too. If I may quote JRR Tolkien's much more eloquent phrasing: “Elves seldom give unguarded advice, for advice is a dangerous gift, even from the wise to the wise, and all courses may run ill.” Now can we stop talking about this?

(And by the by, ALL CAPS do not make you sound more authoritative in your statements of opinion, in fact quite the opposite. FWIW, instead of "You're WRONG" maybe you could try "I disagree" next time. Lends itself to much more civilized discussion.)

[chesebert]

OP, I agree with other posters that your life insurance is way too high, even for a standalone policy not attached to your job. If you're in good health, it should be much lower. I'm also mid 20s and have a $250k policy for $27/mo through Farm Bureau. I would look into other options on that as a way to cut some expenses.

That figure is for $1.5 million on H and $1 million on me; we were planning to cut mine to 500k when I stopped work and increase his to $2 million but it would stay roughly similar. I guess we could have less insurance, we were advised that the policies (both a combination of term and whole-life) were typical amounts for younger professionals with our degrees and incomes (I currently have a job making roughly 2/3 of his 190k).

Yours is actually NOT that high. I pay for similar coverage - slightly older when I originally purchased the policies. I have subsequently gone out and priced other policies over the years, but most AA or better-rated insurers come back with similar pricing so I stopped looking. Also, I wouldn't change your allocation because if the wife dies before the husband, the husband will need to get a nanny and possibly a cook/cleaner/driver, and they are not cheap in NYC.

I suspect (pure guessing here) insurers that offer great rates are either for low amounts, with terrible riders or have bad credit ratings.

Your problem is housing, commute and food. You can save some on commute and food, but any real networth increase would likely come from bonuses and making sure to stay with the same/similar job over the next 10 years.     

[researcher1]

researcher, with your screen name I'd expect you to know that one anecdote/data point does not disprove a statement about averages. Also, you didn't include the location of the poster selling the condo, which would be pertinent to the discussion (specifically, of whether the OP's family's housing costs/choices are unreasonable).

However, I do think your argument, as you're making it, amounts to "never buy houses because they might go down in value and then you'd lose money." But you don't just buy a house as an investment, you buy a house to live in, and if you don't buy a house, you're losing money every month paying rent, indefinitely. The details of that rent-vs-buy tradeoff vary on the numbers in the area, and also personal priorities, and risk tolerance(/debt aversion), which we can't properly account for in an equation.

If it makes you feel better, let's not call it "saving" let's call it "debt repayment". This family has already bought this condo and have every intention of staying in it. They already took out the mortgage so they are on the hook for that 424k regardless of what the house value does. They chose the guaranteed 3.6% return on ~$1k of their money by choosing the shorter mortgage (actually slightly more since they got a lower rate by committing to the 15 year) over the anticipated 7% gains in the stock market. You might have chosen differently and that's fine, too.

Galliver -

You have extremely BAD reading comprehension skills.

If you go back and thoroughly read the previous posts, you will see that my sole argument was that you should not consider your mortgage payments as "savings" or "investments" as another poster suggested. 

Could you point to where I said anything that could be construed as "never buy houses?"  I specifically stated in a post that I am not arguing against home buying (quite the opposite actually).  I also never suggested that the OP's condo purchase was a bad idea.  It sounds like you are actually in agreement with my previous posts (if you had bothered to read them).

If you read any of my posts, you would also know that I did not use just "one anecdote/data point" to refute the notion that "no one lost anything in 2008..."   I included several data points to disprove this statement, including a link to a Wall Street Journal article.  I included that last anecdote so davef could see that there is, in fact, someone who lost money in real estate.