Author Topic: Young family, torn on how to proceed. Looking for advice!  (Read 8634 times)

Transmatic

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Young family, torn on how to proceed. Looking for advice!
« on: June 03, 2014, 07:56:15 AM »
I'll try to keep this brief while providing all the facts. I'm 27, my wife is 23 and we have a 2 year old little boy. After graduating college I joined the military (spec ops) but was hurt during a training mission and was released from active duty after 1 year of service. I am not apart of the guard and have no military ties any longer. My wife and I decided to move back to Missouri to be close to her family. In January 2013 we purchased our home (no money down) using VA loan. We paid $109,900. We decided to buy the house in a small town in between where my wife's family lives and where I work. We about 35 miles from both my work and my in-laws. To ease the burden of gas, we bought a used 2007 Prius for $10,400 with 69k miles this past December. We live on an extremely tight budget but I feel like we are making no progress on paying off debt. My wife stays at home with our son. She operates a successful photography business which brings in about $400 a month (she shoots on the weekends so I can take our son and then edits during the week). If she had more time available she could certainly increase her business. Our budget is below. I currently make $46,575 salary with take home of about $2,850 per month.

$680 - Mortgage and insurance
200 - Average utility bill (was only $147 this past month, our lowest ever)
40 - cell phones (republic wireless)
8 - Netflix
450 - Groceries and baby supplies (diapers, wipes, etc)
330 - Prius car pmt
180 - car Insurance
250 - Student loans (20k total debt)
150 - GAS
180 - Health insurance for our son (wife hasn't had health insurance since we left military)
175 - Tuck pmt (only owe $1,200 more till payoff)
$2,643 TOTAL (about $200 left over each month, most of which typically goes to unforeseen cost and/or thrown at debt)

We VERY rarely go out to eat, when we do we keep it under $20. We haven't been to the movie theatre in over 2 years. We rarely go out to bars, but when we do, we have just 1 drink or split a pitcher). We own a 2004 Honda Accord with 208k miles (paid for and carry only liability ins), this is my wife's car. We also own a 1999 Chevy 1500 pickup which I paid 2k for from a friend. I financed this so our auto insurance will decrease once paid off. I use the truck to operate a side business on the weekends when my wife isn't doing photography, and use it to haul supplies for our home. Since purchasing our house I have completely remodeled the inside. I estimate we could sell our house right now for about $125k.

We live in a town of 14,000 people (not many job opportunities). I commute 75 miles a day, 5 x a week. We are contemplating moving within a few miles of my current job once we have been in our house for 2 years (as to avoid capital gains tax). But I haven't been able to convince myself it's the right idea. I feel as if I'm spending my retirement contributions on driving back and forth to work, not to mention the vast amount of time I'm wasting that could be spent with my wife and son. IF we do move, we will be over an hour away from my in-laws, which is fine with me, and perhaps it will force them to come visit us instead of us driving to see them once a week.

My wife will start to babysit for a friend starting in August. That will bring in $400 additional each month, on top of her photography gig. She could charge more but is trying to help a single working mom. Daycare is between $800-1,000 a month here, which is why my wife is a stay at home mom. She also only has a HS diploma so her earning power is somewhat limited.

Looking for advice on how to proceed. We bought our house with the intentions of fixing it up and selling it so we don't mind moving, just trying to justify all the cost. Any advice is appreciated.

skunkfunk

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #1 on: June 03, 2014, 08:06:41 AM »
I like your plan of moving closer to work, but do some research on the costs. If you do that, sell the prius and get a less expensive vehicle. If you are mechanically inclined, something like an old ford Festiva would get the same fuel economy at 1/10 the purchase price with very inexpensive insurance and maintenance - this you could do whether or not you move. You are spending $835 a month on automobiles. This is going to be your biggest savings.

Based on your take home - are you contributing to your retirement plan? If your company has a 401K that they match, take full advantage.

Are you cooking great food? You can save on eating out and alcohol by making your own delicious food and drinks. Start a garden for fresh vegetables on the cheap.

450 on groceries and baby supplies - are you using disposable diapers? It is probably too late to worry about it for this kid, but you save a lot of money with cloth diapers.

I can't gripe at you too much - there are several areas where you're doing better than myself: housing, TV, and pets.

Gimesalot

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #2 on: June 03, 2014, 08:09:38 AM »
A couple of thoughts:

I am not sure if moving makes the most sense.  Have you looked at an amortization table to make sure that you could move and not have any hidden financial costs?  Remember that selling a house costs about 6% of the selling price.  Also, more and more buyers expect at least part of the closing costs to be paid for by the seller.  Would you have anything left for a down payment?

What happens to your wife's income?  How is that spent?  Right now I see about $600 a month that isn't accounted for in your budget.  If you applied that to your truck payment, that would probably free up another $225 a month (payment and insurance).  Once your wife starts the baby sitting, it sounds like you could have over $1000 a month to pay off debts.  Not too shabby!

One last comment.  Maybe if your wife won't be babysitting full time, she can look at some work from home options.  There are several that earn over $12 an hour.  Just 10 hours a week could greatly increase your cash flow.

quilter

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #3 on: June 03, 2014, 08:16:50 AM »
Have you checked healthcare.gov for healthcare?  Just from casual reading it seems like you should be able to get cheap insurance at your income level for her and your son. But I could be way off base.

If you moved closer to work, are the housing prices similar?  How much do you calculate it would cost to move, including selling the house?  If you move, will your wife have the same photo opportunities?  Would she lose the babysitting gig? 

If your in laws don't like to drive the 35 miles to see you, why do you think they would drive the 70, or would they expect you to drive the 70?  I may have misinterpreted your posting

If you did move closer to work, could you cut down to one vehicle? 

Is you wife for you moving? 

former player

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #4 on: June 03, 2014, 08:35:49 AM »
That was bad luck with the training injury.

You have several sources of income: your job, your side business using the truck, your wife's photography, your wife's babysitting and your house remodelling.  That makes you hard-working people who are in a decent position to make financial progress.  Also, you are young: time is still on your side.

You moved to Missouri to be near your wife's family.  Is there any chance they can help out with babysitting during the week so that she can further develop her photography business?

You and your wife are being very generous in providing child care from August onwards at 50% of the going rate.  I would suggest three things: 1) any costs involved (food, nappies, washing, babywipes, gas) must be charged on top of the $400 so that the whole of that $400 is money in your pocket, 2) you put a time limit on how long the arrangement will continue at this price (possibly until you sell your present house, so that this arrangement does not tie down your future options), 3) don't let your wife's friend run up a bill - make sure she pays weekly, and preferably in advance (if she is not paying in advance, you are effectively loaning her the money for the week - you are already doing her a big favour, you can't afford to do her that favour on top).

You potentially have $15,000 (less selling expenses) coming in after January 2015 if you can sell your remodelled house for what you think it is now worth.  Could you get another 100% loan from the VA to finance another house which you can buy and do up?  If so, you can use the profit from your current house to pay down loans.  If not, use it as the deposit on a new house to do up and either live in or sell on.  In your current financial situation, you need to make all your money work as hard as you can for you, and if you can use that $15,000 either to pay off debt or as capital in a new remodelling project it will be working much harder for you than it is at the moment.

I bet you are underestimating how much you are currently saving: try adding up the principal payments on the mortgage, the principal payments on the student loan, the principal payments on the prius and truck, the monthly amounts saved from your wages, and the amounts saved from your wife's photography.  Add to that in a couple of months an extra $400 a month which can also go to pay off loans.

As to where you move if/when you sell your house, I think it depends on your current main job.  Are you happy there and are there prospects to improve your pay there?  Could another job be better for you, and if so, where would it be?  If you plan to stay at your current job, moving closer is a no-brainer: less expenditure of time and money on a long commute, more time for your side-gig, more time for your wife's photography while you are babysitting, more time with your wife.   If the only time you see your in-laws is at a weekend (ie they are not helping your wife out during the week), then you are exchanging 350 miles a week of commuting for 70 miles extra on a weekend trip.
« Last Edit: June 03, 2014, 08:40:00 AM by former player »

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #5 on: June 03, 2014, 09:00:38 AM »
I'll do my best to answer the questions that have been asked.

Based on your take home - are you contributing to your retirement plan?
My company matches up to 3% dollar for dollar, so I contribute 3%. However, I REALLY want to start a Roth and start making serious contributions.

Are you cooking great food?
Yes. My wife cooks every night. She has become a great cook since we married.

What happens to your wife's income?  How is that spent?  She has been mostly reinvesting her earnings to purchase more equipment for her business. Lights, props, backgrounds, better lens, external flash. She's just now gathered most of what she feels she needs. So that money should start flowing in to our budget now.

There are several that earn over $12 an hour.  Just 10 hours a week could greatly increase your cash flow.
Do you have any suggestions as to where I could find something like this? I've searched in the past but after reading deeper most of the gigs seemed like more of a waste of time.

Have you checked healthcare.gov for healthcare?
Yes. Signed my wife up but the open enrollment period closed before I could make the first payment (wife was going to use her cash flow to pay for this expense) so we are waiting for the next open period. The cost will be $292 a month.

If you moved closer to work, are the housing prices similar?
Yes. Prices are very similar, only a slight increase from what I have been able to see. But many more options as the population is 120k vs 14k people.

How much do you calculate it would cost to move, including selling the house?
As "Gimesalot" said, about 6%, so about $7,000 in our case.

If you move, will your wife have the same photo opportunities?  Would she lose the babysitting gig? 
She would have a much better client base, and keep her current clients. She could also increase her prices. She wouldn't loose the babysitting gig.

If your in laws don't like to drive the 35 miles to see you, why do you think they would drive the 70, or would they expect you to drive the 70?
We recently sat down with my mother in-law and told her that we can't keep driving back and forth and that they can come visit us instead. The problem is every time she comes over she just starts trying to rearrange our stuff and what not, she's very controlling, it can be difficult to deal with. But, I've put my foot down over this issue and in the last 2 weeks we haven't made the drive to their house. They've come to see us once.

If you did move closer to work, could you cut down to one vehicle? 
I think we could cut down to 2. The truck is a must for all the work I do. I am very mechanically inclined. I've actually been able to generate some cash flow by buying a few junkers, a Ford Windstar for $500 and a Honda Civic for $1,200 and fixed them and sold for $2,200 and $2,800 each. That's what allowed us to purchase supplies so I could update our home. Plus, my wife's grandpa owns a furniture and appliance store so we were able to update things at cost, which saved us TONS! The truck and 1 car would be very doable. I could bike to work if we lived closer. As a former college distance runner, biking 10 or even 20 miles is a breeze, I use to run that far every single day for many years.

Is you wife for you moving? 
Yes. She's now ready as she sees just how costly and time consuming it is living so far out from everything.

You moved to Missouri to be near your wife's family.  Is there any chance they can help out with babysitting during the week so that she can further develop her photography business?
Unfortunately no. Both my in-laws work 5 days a week, and my father in-law works Saturdays as well.

Could you get another 100% loan from the VA to finance another house which you can buy and do up?
Yes. However, I can only have one VA loan at a time, you can not have simultaneous loans.

Are you happy there and are there prospects to improve your pay there?
Yes. I started out in July 2013 making 45k. I was given a 3% raise to $46,575 effective 1 Jan 2014. It's a non-profit company the owners started which is a branch off of a very successful parent company they own. I am the only accountant (we have a staff of 9 ppl) and I also oversee $60 million endowment account. I kind of have a dual role as accountant/investment analyst. I'm working hard to justify asking for a raise during my end of year review. I've created and implemented quite a few processes that have greatly helped. I report directly to the controller. I'm the youngest person in the company and our director wants me here for the long haul. I can certainly see myself being here for quite a while, unless the pay doesn't keep up with my "worth" has an employee.

Could another job be better for you, and if so, where would it be?
I certainly believe that's possible. I'm not your typical accountant. I'm a very outgoing, well spoken individual (as I've been told at least). I see myself being successful in a number of thins however I'm not quite sure exactly what that looks like. I'm probably destined to be in sales, but anything where I'm interacting with clients, establishing and maintaining relationships is one of my greatest strengths.

then you are exchanging 350 miles a week of commuting for 70 miles extra on a weekend trip
This is exactly what I told my wife, and this is what really opened her eyes as to how much of a waste my driving is.

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #6 on: June 03, 2014, 09:04:58 AM »
Forgot to mention, we had a horrible hail storm about 2 months ago. I spent 3 straight days, and 2 evenings after work putting a new roof on my house. This put over $4,000 in my pocket by doing it myself vs letting a "professional" crew do it. With that $4,000 we paid off the credit card balance that I had been carrying for over 2 years. A VERY big lesson learned. I was young(er) and dumb when I ran it up, it was a great learning lesson.

I'm still expecting between $800 and $1,000 more back from the insurance company for "recoverable depreciation" and will use that money to pay off the truck.
« Last Edit: June 03, 2014, 09:06:46 AM by Transmatic »

PindyStache

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #7 on: June 03, 2014, 09:21:57 AM »
Sounds like you have a lot of opportunities that you are pursuing, which is awesome. The only other thing I will add now is to re-bid your auto insurance. You say you carry liability only on the Accord, and I assume you have similar on your truck. $180/mo is a large line item. Certainly reducing the number/fanciness of vehicles in your fleet would help as well.

Thanks for sharing and best to you and your family!

SDREMNGR

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #8 on: June 03, 2014, 09:29:50 AM »
How about renting your home out and moving closer to work and renting?  If the net difference in cost is positive in your favor or close to zero, then you would win on gas and time saved.  Don't underestimate the value of the time saved.  Also, being in bigger city would help out your wife's business.

Set concrete goals for yourself and your wife's business. With dollar amounts and time deadlines.  Set a goal to cash flow positive by $1000 per month for your wife's business by year end.  Focus on ways to grow business by word of mouth and advertising.  Set a goal for your side income.

You were a competitive runner so you know the value of goals and tracking progress and how it helps you reach your goals.

You may have some fallout from in laws if you move further and don't see each other as often but it sounds like it will be a net positive.  Perhaps if you can move within 5 miles of your job you can sell off 1 car and bike to work and only drive out to see in laws once every 2 weeks or once a month.  Much less driving per week.  Saved commute time during week can go toward whatever you want.

Your income level will definitely get your health care costs mostly covered if you go through the government health exchange.  Look for HSA plan if you qualify.

Lastly but quite importantly, know that you are starting from a pretty good place already.  You are not sinking, only rising slowly, which isn't bad.   Now you just have to tweak your expenses and living arrangements a bit and focus on future goals.  People on here are generally pretty good at focusing on cost savings but don't focus enough on income increasing.  You can probably increase family income by 25-50% this year if you went after it.  You guys sound like the scrappy type which bodes well for you.

celery

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #9 on: June 03, 2014, 09:45:37 AM »
I think you and your wife are doing a great job with your finances.  You seem to have made a lot of good decisions.  It can be frustrating when you're just starting out, because your wife needs to take care of the kids and your career is just getting started.  But your income will likely increase quite a bit over the years.

The only expense that looked high to me was car insurance.  We have a similar situation in terms of the age of the cars, and we're paying $1,130/year.  You're paying almost double that.  Obviously it differs by state and driving history.  But check that your deductibles aren't too high.  Your bank will dictate your collision deductible on the Prius, but on the old beater you probably don't need collision.  If the high insurance is driven by your commuting distance, take that into account as you try to decide if you should move.

Regarding the potential capital gains tax, one thing to keep in mind is that any sales commission you pay will be deductible against that gain.  So if you pay a 6% commission, you will only have to pay tax on any gain over and above 6%.

Personally, if you think you might work in the same area for the long term, and if it doesn't cost much more money, I'd probably move.  Just for quality of life.

SomedayStache

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #10 on: June 03, 2014, 11:04:12 AM »
3 cars is a lot, especially when 2 of them have loans against them.  Even when the loans are gone you will be paying insurance, gas, registration, and maintenance on 3 cars.  Figuring out a way to drop one of the cars is the low-hanging fruit in your situation.

What if you keep the Accord for your commute? (Or keep the Prius for your commute if you think that $330 is worth it.)  Can your wife drive the truck during the day?  You can put carseats (even rearfacing carseats) in the front seat of a truck (search 'carseat forums' or go to carseat.org and ask the experts). With only 1 kid that is a very doable option.  Another option for your wife is to find a cheap SUV that can pull a trailer.  Then you get out of a carpayment and all the associated costs that go with a car. On the weekends you can use the SUV/trailer for your side job.

I have 3 kids and we are a mostly single-income family.  I drive a paid for Toyota Corolla 40 miles each day for my commute.  My spouses watches the kids during the week and we live on an acreage and he does side jobs that most people think we would need a truck for.  Instead we have a Honda CRV that can pull a trailer and fit 3 carseats.   The trailer doesn't need regular oil changes, doesn't have a car payment, and doesn't require insurance.  5 years ago and 2 kids ago our situation was very similar to yours.  I really really wanted a hybrid car, but the MPG difference between a Corolla and a Prius doesn't make the extra expense worth it - do you think it does in your situation?  We had a truck which we decided to sell to get a more family friendly car and replaced the truck functionality with a trailer.


Cheddar Stacker

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #11 on: June 03, 2014, 11:21:06 AM »
A few things from a fellow Missouri accountant:

1) Make the move. Time and money savings will open up a lot of opportunity for saving.
2) Sell a car. I don't care which one, but 3 is too many for 2 adults, no excuses.
3) Re-evaluate your car insurance. $180 is way too much. Get rid of everything you don't really need, and increase the deductibles.
4) Salary - that's very decent for the beginning of your career at a non-profit. However, with the outgoing personality you have, you could be a high earner at a CPA firm if you can become a salesman/rainmaker. Look into CPA firms in the new town of 120K people.

Other than that I think you're doing well and on the verge of breaking through to a much higher level of savings.

zolotiyeruki

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #12 on: June 03, 2014, 01:11:24 PM »
Transmatic, it sounds like you've already got a good grip of where you are and where you need to be.  I only have a couple of thoughts to add:
1) others may disagree, but $450/mo for groceries for a family of 2.5 seems a bit high, even including diapers.  Our family of 7 (5 kids, including a 1.5-year-old boy in diapers) budgets about twice that amount ($225/week), and in my opinion there are a lot of things on the shopping list that could be cut.
2) You're paying an awful lot for car insurance.  Shop around and get quotes.  Even if you don't switch insurance companies, you can use the information you learn in your efforts to negotiate a better rate from your current provider.
3) Sell the Prius.  It's costing you more in insurance and car payments and depreciation than you can possibly save in gas.
4) The "whether or not to move" question has been discussed at length already. I'll cast my vote for "move."

Out of curiosity, how many grandkids do your in-laws have?  I ask, since I've seen similar sorts of relationships in my own family, where extended family live in the same city.

amicableskeptic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #13 on: June 03, 2014, 01:56:51 PM »
  • Definitely move, either by selling and buying a new house or by renting your current house and renting a new house.  Do whichever is easier to make reality soon.
  • Definitely sell the Prius, once you've moved it will be an even bigger no brainer, but even right now you could sell it and save a bunch.
  • Definitely pay off your truck loan, it is costing you a bunch per month in interest and insurance, get rid of it ASAP.
  • Definitely shop your insurance around after selling Prius and paying off truck loan.
  • Definitely get insurance through healthcare.gov next year.
.

Potentially ride your bike to work some days even before moving.  I say potentially because I don't know if there is a reasonable route, but at your fitness level a 35 mile bike ride is totally do-able you just have to find a route to do it safely on.

As for your wife doing daycare, I wouldn't be as harsh about the rules as others here suggest unless your wife is looking to make there her long term hustle and make some serious cash from it.  As it sounds she's looking to help out a friend and make her photo business her cash making side hustle.  If this is the case let me also recommend that she starts doing wedding photography if she hasn't already, there is a lot of money to be made there.

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #14 on: June 03, 2014, 02:19:04 PM »
First, let me just say thank you for all the replies. This is my first thread on here, though I've been following MMM for about a year. I often times feel like the geeky outcast when it comes to finances as most of my friends and everyone I know buys brand new cars and throws money out the window left and right.

It sounds like I need to sell the Prius. I can sell myself, but will probably still owe a couple hundred bucks to meet the pay off.

The truck will be paid off in less than 6 weeks.

I don't understand why my auto rate is SO high. When shopping for a new policy through USAA last week I noticed that I had 2 traffic violations. 1 was for a minor weather related wreck I had while in the military. The other was a ticket in Missouri in March of 2012.....but my wife and I were on the other side of the country at that time, so I'm not sure if this is a mistake? I've asked my insurance agent about this but still waiting to hear back from him. I going to have to dig further.

Out of curiosity, how many grandkids do your in-laws have?
They only have 2 but our son was the only one in the state. The granddaughter was in Texas but just moved back as my brother in-law just got out of the Army so he, my sister in-law and niece just moved back to Missouri 2 weeks ago. That should help take some attention away from us and keep my mother in-law more occupied. (mother in-laws really SHOULD come with a warning label of some kind)

Potentially ride your bike to work some days even before moving.  I say potentially because I don't know if there is a reasonable route, but at your fitness level a 35 mile bike ride is totally do-able you just have to find a route to do it safely on.
I would absolutely do this, but there is not a safe route. It's either 100% high way miles, or 50% back roads where there is no shoulder and 55mph speed limit and a very windy road, and 50% highway. I'm quite the risk taker, but this would just be way too risky, even for me.

I've already texted the wife and told her we need to sell the Prius. While she isn't happy, she is on board. Sure does help to be on the same page.


Cheddar Stacker

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #15 on: June 03, 2014, 02:32:00 PM »
I don't understand why my auto rate is SO high. When shopping for a new policy through USAA last week I noticed that I had 2 traffic violations. 1 was for a minor weather related wreck I had while in the military. The other was a ticket in Missouri in March of 2012.....but my wife and I were on the other side of the country at that time, so I'm not sure if this is a mistake? I've asked my insurance agent about this but still waiting to hear back from him. I going to have to dig further.

Reasons why your insurance is so high:
1) USAA - good company overall, but I saw HUGE savings when I switched from them to state farm, then to a broker. I think I'm with Safeco right now, but I just go with the best premium/coverage I can find.
2) You have 3 vehicles.
3) You drive long distances.
4) You are likely carrying comprehensive coverage. If you have 2 old, shitty cars, there is no reason to insure them for dents and cracks. If you total the vehicle, buy another shitty vehicle for $2K rather than paying $500 + each year insuring them for all the little BS.

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #16 on: June 03, 2014, 02:55:23 PM »
I'm with AAA right now, but USAA didn't offer a better rate. I only have liability on the Honda and will only carry liability on the truck in just a few weeks when I pay it off. That should bring my monthly insurance pmt down to about $50-55 a month, pretty huge savings.

lhamo

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #17 on: June 03, 2014, 03:20:52 PM »
Your take-home pay seems very low relative to your income.  Are you maximizing your federal tax withholding?  By my calculations you should be paying only around $2500 in federal tax annually on your salary, and that doesn't include things like the earned income credit that you may be eligible for.  If you are getting a large tax return every year you need to stop that and adjust your withholding.  Don't give the federal gvt an interest free loan.

I agree that moving sounds like a good long term plan.  And don't sell yourself short career wise.  A good accountant should be able to make more than you are, even in a relatively small, low-cost city.

Paying off the truck will make a big difference, as will selling an extra car.

good luck -- I think you are going to see great progress very quickly

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #18 on: June 03, 2014, 03:49:57 PM »
I did a quick quote with Geico and WOW, they can really save me some money. I'm with AAA right now and they require that if you have your homeowners policy with them that you have your auto policy there as well. So I'll need to move both my homeowners and auto policies. I'm gonna get on top of that ASAP.

I really hate to get rid of the Prius, as both our other vehicles have 191k and 208k miles. However I know it will generate about an extra $450 cash flow a month (wow!) and I'm very good with a wrench. I do all my maintenance and work on my own vehicles (aside from a total transmission swap) so I don't think I'll have problems if anything does go wrong. I fully anticipate my Honda lasting another 100k miles.

I would like to go ahead and move, but I would also like to stay in my house 2 years before selling (to avoid capital gains tax) and so that I can finish the work I've been doing on the basement. The 2 year mark would be next January, which isn't all that far away. VA loans prohibit you from renting the dwelling to someone, so that's not an option unfortunately. Does this plan sound logical? I should also mention that I'm in the process of trying to get my dad to move to Missouri. He's lived in the south his entire life but now that my grandma has recently passed there's no reason for him to stay. I think there's a good possibility my dad will want to rent a room from us which would also allow us to purchase a nicer home at an affordable price. AND he's a hardcore MMM kinda guy, always has been, and he doesn't even know who MMM is.

For now, getting rid of the Prius and our auto ins rate coming WAY down should be a huge help. Really glad I posted and asked these question. There's been some great advice here, obviously a lot of intelligent level minded folks here.

Catbert

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #19 on: June 03, 2014, 04:40:49 PM »
Investigate a bit more about the capital gains issue.  How much will your gain really be?  You can subtract the sales commission plus an improvements you've made to the house.  Plus any capital gains which are in your 15% income bracket are taxed at 0%.
I *think* that the top of the 15% income bracket is around $72,000 taxable income.  Let's assume/guess that your taxable income is $30,000 (after deductions and personal exemptions).  You have $42,000 *left* in the 15% bracket so your 1st $42,000 of capital gains is taxed at 0.

Somebody please check me on this...not much sleep last night.

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #20 on: June 03, 2014, 05:00:14 PM »
I wouldn't worry about a capital gains tax on your house. How much can a house that sold in Missouri for $109,900 go up in 18 months? You would calculate the capital gain by taking your selling price minus your expenses associated with selling the house (Real Estate Commissions) minus any home improvements to the property minus your original purchase price.

seattlecyclone

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #21 on: June 03, 2014, 05:04:23 PM »
I would like to go ahead and move, but I would also like to stay in my house 2 years before selling (to avoid capital gains tax) and so that I can finish the work I've been doing on the basement. The 2 year mark would be next January, which isn't all that far away.

Why are you so worried about the capital gains tax? It's true that you have to own and live in the home for two years to qualify for the exclusion. However, you should note that the long-term capital gains tax rate is 0% for people in the 15% tax bracket.

For 2014, the top of that tax bracket is $73,800 for a married couple. Add in a $12,400 standard deduction and a $3,950 personal exemption for each of the three people in your family, and the sale of your house would have to push your adjusted gross income above $98,050 before you would owe a cent of capital gains tax (to the feds, anyway). Subtract your $46k salary from this limit and you could have more than $50k of house-related capital gain income before owing any tax on that income.

Since you paid $109.9k for your house and estimate you would be able to sell it for $125k, I find it extremely unlikely that the capital gains tax would come into play for you when selling the house. You should probably finish any work in progress before selling, but don't wait until January for tax reasons alone.

Milspecstache

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #22 on: June 03, 2014, 08:29:16 PM »
I like USAA as I believe the increased price means that they will cover you well during an at-fault accident (minimizing the chance that someone will come after you for the damages/medical payments).  However, as with any insurance company they prefer if you have other insurance, like Homeowners, to get the discounts which make it all more affordable.

So who insures your home?  USAA?

skunkfunk

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #23 on: June 03, 2014, 09:33:43 PM »
Watch out on the home insurance. Geico was good for car insurance,  but wanted double the price that I pay for home insurance.


« Last Edit: June 04, 2014, 08:24:18 AM by skunkfunk »

Burgis81

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #24 on: June 03, 2014, 11:43:40 PM »
You are both very young! check out the video about rule #2

http://www.bogleheads.org/wiki/Video:Bogleheads_investment_philosophy

rmendpara

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #25 on: June 04, 2014, 12:47:42 AM »
You seem to be on the right track, generally.

First things first. You need health insurance. I don't care if it's a super high deductible and you end up paying for most things out of pocket. One trip to the ER for stitches will cost you $1k+. Anything more than that will easily be $2, 3, 5k before you even realize it.

It's not really "health" insurance, it's more like "wealth" insurance, because it helps to prevent you from going bankrupt in the event any sort of health issues come up. You are both young, and I presume healthy and in good shape, so it's unlikely, but accidents happen. Trust me, the $200/mo or whatever will be well worth it.

From an overall expense standpoint, you're doing fine. There are a few things to review like insurance, which you are already looking into, but nothing seems unreasonable... except for the cars. You work, your wife stays at home, and you have 3 cars? Makes no sense. Keep the Honda (which you expect to last for a while), and the truck (which you need for work).

Family is important, but driving 2 hrs once every week or two weeks makes a lot more sense than driving 45 minutes each way every single day. Hope you can find a reasonable place to move next year.

I would stay on top of your expenses, but put 3x as much effort into your career/income. If you cut a few things here and there and optimize your expenses, you may be able to cut $2-3k out of your annual expenses, but by focusing on your career and making progress there, you could be making $10k more by next year and maybe double your salary in the next 5 years. See how that works?

Don't lose the forest for the trees.

Stay frugal, but realize that the opportunity to cut expenses is limited, while the opportunity to increase income is unlimited.

Thanks for your service. Sorry to hear about the injury.

Good luck!
« Last Edit: June 04, 2014, 12:49:51 AM by rmendpara »

quilter

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #26 on: June 04, 2014, 03:55:46 AM »
You have gotten great advice so far. You are doing great as a young family. Being aware you need to really manage debt and think about retirement and saving at a young age is super important.

One thing you can work on is potty training. I don't mean saying to you wife "you need to get transmatic Jr potty trained" but when you are home start working on it and ask your wife to as well. Having him pee in the toilet with you etc can set you down that path. It is much easier to go places regardless of the expense of diapers and wipes if a young child is diaper less during the day. Night can be a little more difficult.   But at 2 he may not be ready or it may take one day.

Also, a lot depends on how you envision and word things. For instance, think of your three vehicle situation as learning experience. Having several car payments, and keeping three vehicles registered, insured etc. is a big hassle as well as a big expense. Instead of thinking of selling one as a bad thing, try to put it in a positive light. As in, if we sell one vehicle, we can quickly pay off another. What freedom that will bring us.

Lastly, don't forget to continue to build your relationship with your wife. It sounds like you are working hard on your careers and finances. It is an exciting time. Kind words and compliments can go a long way in furthering all your goals and bring happiness into both your lives.

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #27 on: June 04, 2014, 10:36:26 AM »
It looks like I'll end up having my homeowners and auto insurance with 2 different companies, which is fine, I just want the best coverage for the best price. My wife and I had a long talk last night about the absurd amount of driving we are both doing and how we can best change it.

I need at least 4 months to finish the current projects I have going on, so we would be ready to move after the first of the year.

I didn't realize how expensive property taxes are where I work. If we make the move, they will double. From about $900 that I currently pay to upwards of $1,800 to $2,000 a year. Also an interesting side note, but the company I'm currently with (and plan to stay with) will be moving locations in the next 4-5 years. Our new building will still be in the same city (Columbia, MO) but could be clear on the other side of the city. This complicates things as to what side of the city to look for a house. It's actually making me think twice about moving here. It might just be easier to decide where we want to settle down, and go ahead and find a new job in that area and make the move, all at the same time (find job first, then house).

My ultimate goal is to find an affordable house (without being able to spit and hit my neighbors house) within biking distance to my job. I really can't take being in a car for an hour and a half and driving 75 miles a day for a whole lot longer. I do love the company I work for, but not enough that I'm afraid to seek other options.

I'll have the Prius for sale this weekend. I've been able to sell cars pretty fast in the past so don't see it being a problem. At that time we should immediately have an extra $450 per month cash flow with savings from the car pmt and insurance.


MrsPete

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #28 on: June 04, 2014, 08:33:43 PM »
I see several things that could add up to a big difference:

Your housing cost looks good, but your commute is too much.  I agree that moving nearer your job is probably a good idea.

Regardless of whether you move or not, you're spending way too much on transportation.  Between car payments, insurance, and gas, you're over $800/month!  Think about it:  You're spending more on transportation than on your house, twice the cost of your food, and it's just too much.  You didn't mention the cost of keeping three cars tagged, paying property taxes on them, and the cost of maintaining them.  More than anything else, you've gotta get out of this situation!  When we were your age, we owned one car.  It was the one single thing that put us on the track to financial freedom.  It wasn't always easy, especially since my husband was working and I was in college, and we lived waaaaay out in the country far from . . . everything.  Since your wife isn't working, she doesn't really need a car on a regular basis -- but do I understand that you have three vehicles between you? 

Two adults and one baby eat $450/month in groceries?  Even with diapers, that can be slashed significantly.  We don't spend that much, and we have two teens -- one of whom is a vegetarian.  You can cut your grocery bill in many ways, but I suggest these methods:

- Cut your beverage budget.  30% of the average grocery cart's cost is for beverages, and few of them add any real nutritional value to the diet.  It's an easy first target.
- The grocery store is convenient, but it's also expensive.  Search out alternative options.  For example, I shop at a farmer's market, a health food store (expensive prices on most things, but the few things that're good prices are WONDERFUL), a butcher shop, a scratch-and-dent food store, a co-op, a couple ethnic food stores, and the internet.  I've found these places over the years, and several of them aren't convenient -- so when I go there, I stock up. 
- Search out cheap recipes.  Start with potato soup (really, soups of all kinds), lentil meals, red beans-and-rice, breakfast for dinner. 

It's very kind that your wife is willing to provide day care for another child for HALF the going rate, but it's also rather foolish.  What she's taking on is REAL WORK, and I suspect she's going to become resentful pretty quickly.  You say she's earning $400/month right now with her photography . . . and that's just weekends?  But she's willing to work all day x 5 days a week to earn that same amount?  Clearly she's making more with her photography, and it makes sense to put in fewer hours. 


Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #29 on: June 05, 2014, 09:50:43 AM »
MrsPete, thank you for the suggestions. I would say that we could cut our grocery budget a bit, however being that we have such limited resources where we are I think it will be harder to jump from store to store for certain supplies. However, I'm going to go over our grocery budget this weekend and see where we can make improvements. Good pt about the beverages, although I will say the only beverages we buy is milk and juice for our son, and tea bags as my wife and I drink a lot of sweet tea (I'm from the south).

About the Prius. As I was cleaning it up last night my step-dad called and when I told him my plan for selling the Prius he tried to sway me towards keeping it. His logic was that with a high mileage rust bucket of a truck (used for side job only) and another car with 208k miles that it's likely we will require a safe and dependable family vehicle in the next few years. He suggested that I keep the Prius and pay off the balance ASAP. I told him that during that pay off time I would still be wasting money on full coverage insurance and his argument was that the money spent on insurance will offset the sales tax I will pay in a few years on another vehicle.

I believe, especially with my mechanical skills that I can keep the Honda running for quite some time. But I also want to do what is most logical in the long run. Do yall still suggest that I go forward with selling the Prius? I already have it posted on Craigslist, the dealer only wanted to give me $8,300 and I'm confident I can get $10,000 selling myself.

We are planning on moving but it won't be until the spring.

skunkfunk

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #30 on: June 05, 2014, 09:53:28 AM »
Sell it. I don't see how a prius will be any more safe and dependable for the long haul than your Honda.

NewStachian

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #31 on: June 05, 2014, 10:02:11 AM »
I didn't read every post, so stop me if this was covered:

If you were seriously injured while on active duty have you filed your disability claim with the VA?

If not, DAV can help you get started: http://www.dav.org/ (there are other ones, but this is the non-profit I went with)

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #32 on: June 05, 2014, 10:10:48 AM »
I've already filed paper work with the VA. Maybe you'll get a kick out of this.....they have up to 18 months to process the paperwork! I wasn't hurt long term, but am hoping the be able to see the VA for any back related issues as that's what I hurt.

I was in a special operations career field which was incredibly physically demanding. Now just trying to get our family back on track, so to speak and making wise financial decisions. Wish I never would have bought this damn Prius in the first place (face punch double fisted)!!!!

MrsPete

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #33 on: June 06, 2014, 06:57:38 AM »
we have such limited resources where we are I think it will be harder to jump from store to store for certain supplies.


I told him that during that pay off time I would still be wasting money on full coverage insurance and his argument was that the money spent on insurance will offset the sales tax I will pay in a few years on another vehicle.
I suspect that if you start investigating it, you'll find that your grocery resources are not limited.  Two things are key:

- These resources exist.  Everywhere.  But they aren't necessarily going to jump out at you -- you find them over time.  I shop at perhaps 20 places total for groceries, and I haven't always known about all of them -- and they change.  For example, when we lived out in the country, we used to shop at a Scratch-and-Dent place that was very near our house; then they moved an hour away, and we never have any reason to go that direction, so we stopped using them.  Just last year my husband prompted me to try out an Asian grocery that I've drive past all my life -- wow!  The selection, the prices!  Now I love them; I was foolish not to visit before.  You have to seek out these places. 

- You don't shop all these places every week -- or even every month.  Take the Asian grocery store I just mentioned.  It's a solid hour's drive from my house, but it's in an area of "the big city" where I go occasionally.  So if I know I'm going that direction (which is perhaps 3-4 times a year), I make a big list and stock up.  I do not make an hour's drive just because we want to eat dumplings this week; rather, I buy 20 packages of frozen dumplings and a 50-lb bag of rice.  Similarly, I buy most of my spices at a health food store in that same area (nothing else in the health food store is a bargain).  One place I do shop weekly is the discount bread store; it requires about 10 minutes extra to make that one extra turn on the way home from work; it's a tiny store, so it's a quick-in-quick-out place.  They sell good bread 3 loaves/$1.59, so it's worthwhile.  Often I don't even get out of the car -- I just send my teen in to buy.  Once you find "your places", you learn to plan your shopping. Once you're used to it, it isn't any more effort than stopping in the grocery store once a week. 

- Okay, I said two and it's really three:  Organize and protect your food supplies.  For example, I buy the good rice in 50-lb bags.  If a mouse eats a hole in a 2-lb bag of rice, you're mad that you have to throw it away -- but if a mouse eats a hole in a 50-lb bag of rice, you've actually lost something of value!  So avoid that by buying a plastic or glass storage container that'll protect your investment.  Here in the South, mealey bugs are bad too.  I have a ton of old mason jars, and when I come home with a bag of dried pintos or chocolate chips, I ALWAYS take a minute to pour the contents into a glass jar.  I do not stock up heavily on things like cake mixes or Rice-a-Roni that come in cardboard boxes; I've been burned too many times! 

Similarly, keep your things organized.  I mentioned that I buy spices just a couple times a year (no spice ever costs more than fifty cents); I keep all my spices well-organized, and because I'm a little OCD I keep a laminated list of ALL spices in the back of that cabinet.  When I know I"m going near the health food store, I pull out that list and highlight the things I should buy.  It takes all of 5 minutes, and then when I come home, I wash the list and return it to the cabinet.  If I didn't do this, I'd end up missing the Tarragon and having three Nutmegs -- and the upshot is I'd end up buying $7 Tarragon at the grocery store and throwing away old, stale Nutmeg. 

You won't suddenly go from -- was it $450/month? -- to a lower figure, but if you little by little search out new options and ways to manage your food better, you'll see your bills decrease (even as your son grows and begins to eat more!). 

Transmatic

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #34 on: June 06, 2014, 09:10:37 AM »
Thanks, MrsPete. You've obviously got your grocery shopping down to a science with relative ease over time. My wife and I discussed the grocery budget last night and she's going to start looking more in to what we can do to budget more effectively. We did a simple google search and found a tiny little Asian store just down the road from us that we never knew about (it is TINY) so that will be worth checking out.

Also, I already have a few people interested in the Prius so I suspect I'll have it sold rather quickly.

It's truly amazing (sadly) how much more money you feel like you are making when so much of it is no longer going towards unnecessary car payments and insurance.

I switched my homeowners insurance over to USAA yesterday and save a THOUSAND dollars per year. Geico offered me a slightly better rate on auto insurance than USAA, but I'm debating if $10 in savings a month is worth going with Geico over USAA. Either way, I will have reduced my auto insurance 50%!!!!!

mm1970

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Re: Young family, torn on how to proceed. Looking for advice!
« Reply #35 on: June 06, 2014, 06:45:04 PM »
We have had good luck with our USAA insurance. You are in your 20's, that might be working against you?

I'd move, frankly.  But note: your company is moving in 4-5 years...that might not actually happen, so I wouldn't worry about that right now.

Grocery bill tips: (just google)
The Prudent Homemaker
Cook for Good
The Grocery Shrink
Budget Bytes