Author Topic: Case Study: Please help, have no idea how to improve our finances  (Read 17577 times)

GoldenStache

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #50 on: December 02, 2014, 06:30:09 AM »
You have had a few suggestions about refinancing your home, don't bother, you will not qualify with no income.  Your house is huge, kids can share rooms and that will save you a fortune for now by downsizing.  With your current income you should not be thinking about your forever home, you need a home to live in that is not breaking you every month. 

Have you looked into renting your house out? Is there a demand in your neighborhood? You could probably get $2-3k a month, run the numbers because that could be an option for you. 

You could probably find a house for half the price, 1/2 of the insurance, cutting utilities by 1/3 saving you thousands per year.  Start investing the extra money that you have (after downsizing and paying off bills) and let your money start to work for you.


boarder42

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #51 on: December 02, 2014, 06:40:52 AM »
Golden - KC isnt really a big house rental community i would say they would be best to sell and buy in a non FEMA high risk flood zone.  I dont really understand why you would own a home in that zone.  especially for 275k.  thats a high price on a home in the KC area.  I can buy lake front 4 bed 4 bath homes for that price in KC.  With little to no HOA.  500 HOA and i assume you are getting maybe a pool.  Move.  i'm also going to assume you're in JOCO with those prices.

leopard print

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #52 on: December 02, 2014, 01:35:26 PM »
You got it - we are in joco. We arent completely opposed to moving, we just want to wait until everything settles down and we know our exact financial situation. Dh will search for jobs in the entire kc metro area. That said;

Are there any mustachians who place a very high importance on having a nice home and are willing to pay for it even if it means a more delayed ER? In our situation, this upcoming windfall would allow us to remain in a home we love with no debt or mortgage payment, and have 750.00 - 1000 for savings (or more if dh works extra shifts) each month.  Clearly I'm not a hard core mustachian yet,  but that seems reasonable to me -especially since he is starting at a low pay scale and will likely continue to increase income.

rmendpara

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #53 on: December 02, 2014, 03:09:35 PM »
You got it - we are in joco. We arent completely opposed to moving, we just want to wait until everything settles down and we know our exact financial situation. Dh will search for jobs in the entire kc metro area. That said;

Are there any mustachians who place a very high importance on having a nice home and are willing to pay for it even if it means a more delayed ER? In our situation, this upcoming windfall would allow us to remain in a home we love with no debt or mortgage payment, and have 750.00 - 1000 for savings (or more if dh works extra shifts) each month.  Clearly I'm not a hard core mustachian yet,  but that seems reasonable to me -especially since he is starting at a low pay scale and will likely continue to increase income.

Without a mortgage, you would be somewhere in the ~$1.2k/mo range for all housing expenses (tax/ins/util/etc).

You don't have to decide anything right away, so maybe try keeping the place until at least you find out what next career steps will be. If it's in the same area, then you can re-evaluate. If it's in a new area, then it's pointless to argue about the house because you'll be moving anyway.

Overall, your expenses aren't unreasonable. 3.5k/mo for a (almost) family of 5 is hardly living large. The real issue, in my opinion, is that you barely expect to make more than that in the future. So, it comes down to a choice of whether you reasonably expect your income to have at least a 25% lead over your expenses at some point in the next few years? If you made 53k (aftertax), then spending ~42k would yield a 20% savings rate. Not extreme but not bad either. It's a solid middle ground to reach financial goals and also enjoy whatever you want.

So, I'll pose a question back to you, do you think you can reach a 20% savings rate? It's unlikely you'll retire early from that, but if that's not what you want then it's alright.

If it were me, I'd focus all my effort on getting income estimate to at least 55k in a few years, with opportunity for advancement afterwards.

TerriM

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #54 on: December 02, 2014, 03:37:46 PM »
I realize you have a 3rd coming along and that this may sound really crazy, but given that you're taking care of multiple kids anyways, what about doing home-based child-care for someone else's kids once the baby is around 6months?  You sound like you have the space.   You'd need to look into whether you need licensing, but some places may not require it if you only take on one or two children. 

TerriM

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #55 on: December 02, 2014, 03:49:11 PM »
PS:  Kansas CIty, MO laws:

http://health.mo.gov/safety/childcare/providerinfo.php

Do I need to be licensed?
If you care for more than four children not *related to you, the state requires that you be licensed
.

Maybe you could even find a parent nearby who would drop your eldest at school when s/he turns 5 while leaving their younger one(s) with you.

rocksinmyhead

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #56 on: December 02, 2014, 04:14:55 PM »
Our house is not extravagant but is nice and in a great neighborhood. It is 2500 sq. Ft. 4 bed 4 bath.

!!!!!

not trying to be a jerk, maybe I'm crazy but to me that is a BIG house.

not necessarily saying you should sell it, just saying, different people have different definitions of extravagant I guess?

TerriM

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #57 on: December 02, 2014, 06:07:39 PM »
PPS:  Using a portion of your home for business purposes, including daycare, is tax-deductible :)

http://www.irs.gov/publications/p587/ar02.html#en_US_2013_publink1000226361
 

Cassie

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #58 on: December 02, 2014, 09:53:10 PM »
That is a very big house for 5 people. We were happily a family of 5 for 1600 sq ft & thought we were living large with one bathroom.

TerriM

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #59 on: December 03, 2014, 02:54:41 AM »
We are 5 in a 3BR 1800 sq ft and it is too small.  I have hobbies (sewing, woodworking, guitar/singing) and I like the kids to have hands on stuff to do--arts and crafts, puzzles, legos, piano (upright), and robotics.  We don't have a good backyard for the kids to play in, so they spend most of their time indoors, and when we have people over for dinner, it tends to be large groups sometimes up to 20 people (in past apartments, we have actually shoved beds into closets and set up tables in the bedroom!).  I will also probably work from home after the kids are all in school.  2200 sq ft seems to be the sweet point for us, but most important is the ability to have guests (especially my parents) stay with us which we probably do about 6 weeks out of the year.    Sometimes the guests have families of 5.  Most of these guests cannot afford a hotel or are too frugal to visit us if they had to pay for one.

I would love to have a 2500 sq ft house.  While it would seem extravagant after how we're living, it would take a lot of stress off of our marriage.  I was coaching a robotics team this fall and had a 4'x8'  playing field on the dining room table for 3 months.  We ate dinner at the crafts table which is a small preschool-type table.  My husband did not fit in the kids' chairs.  He was very gracious about the whole endeavor, but having a room dedicated to these hobbies/endeavors would be much better for us.

A lot of sq footage is also lost in the layout.   Stairs, balconies, and hallways  can take up square footage space that do nothing, so your 2500 sq ft house could be just as usable as someone else's 2100 sq ft.   


My bigger concern about your house is the flood issue.  When I was a child, parts of my desert city occasionally experienced large amounts of rain and the news showed houses under water up to the eaves with people boating around and getting airlifted off of roofs.   I assumed this was a regular occurrence (I'm certain it happened multiple years) and couldn't fathom why anyone built there knowing it could flood. We lived higher up than these houses, but during these rains, even our backyard was a river.  So, my biggest concern with your house is the question of what level of flooding will you get.  Basement flooding isn't the worst thing, but if your house has the potential to be completely under water, I am worried for you.

Cassie

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #60 on: December 03, 2014, 11:34:12 AM »
When we had our kids at home & had guests we gave our guests our bedroom.  We slept in the kids beds & 2 of the kids slept on the floor on top of a pile of blankets to make it soft.   If our guests also had kids then they did the same.  It worked out fine.   Now days you can buy blow up air mattresses for the kids that deflate when you don't need them.

Simple Abundant Living

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #61 on: December 03, 2014, 03:13:01 PM »
Are there any mustachians who place a very high importance on having a nice home and are willing to pay for it even if it means a more delayed ER? In our situation, this upcoming windfall would allow us to remain in a home we love with no debt or mortgage payment, and have 750.00 - 1000 for savings (or more if dh works extra shifts) each month.  Clearly I'm not a hard core mustachian yet,  but that seems reasonable to me -especially since he is starting at a low pay scale and will likely continue to increase income.

I have a large home, that I'm probably staying in unless we move for job related reasons. Our current house is a 6bdrm 2500 sqft home with a full finished basement and a 600 sq ft bonus space. We have 8 in the family, but two live away from home right now. This will not delay ER, because we don't have any plans to ER, but are more interested in FI. The problem for us is not an attachment to the home, but to our land and neighbors. We have a .66 acre lot at the end of a culdesac. Very quiet, we know all our neighbors and love them. Our kids have friends and schools all within walking distance. If we downsized, we would have a hard time finding a lot similar to ours in the area we like. Our payment is less than 15% of our monthly income and utilities here are cheap. I do hate to waste energy, so we have made it as efficient as possible and we use our whole house fan in summer as much as possible. We don't have extra flood or earthquake insurance, as it is not required. I would not buy this home now that I am more mustachian, but I can't find enough reasons to leave right now. I think it's great you can stay in your home and have no mortgage, but I agree the problem is the fixed costs such as HOA, insurance, etc. I don't have a HOA, so that seems like a silly cost, but maybe you get some kind of benefit from it? Living in a flood zone is more of a worry. If there's a neighborhood that you would consider living in that didn't require flood insurance, that extra $ could be in your pocket instead of the insurance company's.

Personally, I would hang tight until you see where your DH will be working. Then I would consider a move, considering minimizing fixed costs such as the HOA fees, flood risk, even energy efficiency. Then you are in a prime position to save for ER or to continue his education. Good luck!

TerriM

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #62 on: December 03, 2014, 07:13:04 PM »
When we had our kids at home & had guests we gave our guests our bedroom.  We slept in the kids beds & 2 of the kids slept on the floor on top of a pile of blankets to make it soft.   If our guests also had kids then they did the same.  It worked out fine.   Now days you can buy blow up air mattresses for the kids that deflate when you don't need them.

This is what we do now, but it is still tight.  A fourth bedroom would help a lot.  We don't have the super sized bedrooms that modern houses have.   Putting 5 in a bedroom means moving furniture other than beds.

We also have sleeping issues.  Hubby snores and I'm a very light sleeper.  Earplugs don't work, and I'm not into taking meds.  I currently co-sleep with my four year old....  I'd like to stop cosleeping with her by the time she's a teenager.  Earlier would be better. :)

TerriM

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Re: Case Study: Please help, have no idea how to improve our finances
« Reply #63 on: December 03, 2014, 07:45:04 PM »
If people really want to argue that smaller is better, some neighbors on my block probably have everyone beat.  Eight people in a 900 sq ft. house.  If you're living in that 100 sq ft trailer, then you'll have them beat.

Space needs vary by family, and the needs may be emotional or practical.  If 2500 sq ft is right for you, then it's right for you.  You really have to judge for yourself.