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How to escape low-income life on tiny savings?
anic:
Hello everyone, I’m writing from Ireland. I’m delighted to find this forum and hope I can get some inspiration from you all. I’m 42, I have two young children (6) and (4), I’m separated and I have very little financial security.
The good: I like my life! I have two great, healthy kids. I live in a place I love. I enjoy my work, which is really interesting to me and meaningful (I work two part-time jobs in connected fields). I’m happy. I don’t have any debt. I have good qualifications. I relocated from the capital back to where I’m originally from in 2009. That means that the jobs at my level of qualifications etc are thin on the ground here. But the upside of living where I do, for my children and myself, is so good that I don’t want to move from here. Lower expenses is part of that upside but as well as that, this is where I want to raise my kids – it’s a beautiful area with gorgeous natural resources, a strong culture and sense of community, relatives and good friends. I couldn’t ask for a better place to live. My work is also connected to this community, which is important to me.
The bad: I’m as far from financial independence as I could be. I might be losing one of my part-time jobs – the higher earning one – this year. I work on a contract that is renewed from year to year (so far, I’m in that job for 9 years). The funding for that job may or may not be withdrawn this year which might mean that I’ll only have one job from October 2018. I’m in a position where I’m dependent on decisions made by people elsewhere and over which I have no control. I have hardly any savings. I spent my life not thinking enough about money, savings, pensions etc. And here I am at this sorry pass. Completely my fault, I know.
The facts: Job 1 brings me around €2000 a month net. Job 2 brings me around €800 a month net. I get €280 in child benefit per month from the government (all families do regardless of their circumstances). I get €274 maintenance from the children’s father a month. So in total, I earn around €3355 a month. If I lose Job 1, I’ll be in trouble, obviously. I have a fair amount of monthly expenses between car, childcare, health insurance, phone and so on. I estimate an average of €2500 expenses monthly not including clothes or holidays and possibly other things I’ve forgotten. I’m never overdrawn at the end of the month (except at Christmas). I find that as a single parent, it’s hard to save a significant amount every month. Right now, in my savings account, I have €11,000.
One major plus for me is that I rent my house from my parents who give it to me for the tiny sum of €400. I want to buy the house from them but my precarious financial situation means I can’t get a mortgage. Psychologically, as a 42 year old, I hate this situation.
I need to think outside the box i.e. is it possible to invest when you have savings as small as I do? Could I take over my relative’s rental apartments and do Airbnb for her and have that be financially viable for both her and me? She’s retiring and has lost interest in the business. I wish I had more imagination or drive or business acumen or energy to think differently about all of this and to get myself out of this situation. My mental reserves go towards raising my kids and working but I need to apply myself to this problem. I’m bad at thinking mathematically.
So there you go. Am I beyond redemption?
Many thanks in advance
aoedae:
No-one is beyond redemption! :)
So, some quick summaries and my initial thoughts:
Income
Job 1 brings me around €2000 a month net.
Job 2 brings me around €800 a month net.
€280 in child benefit per month from the government
€274 maintenance from the children’s father a month
=> €3355 a month. May drop to:
=> €1355 a month.
You have a €2000 gap to cover, which you can cover through two mechanisms only: cutting expenditure or increasing income.
Expenses
"I estimate an average of €2500 expenses monthly."
* Make a detailed budget of your annual expenses, and post it under this case study, so other users from Ireland might be able to give you a hand with ideas on individual items
* Include line items for 'lumpy' costs such as clothes, laptop renewal, kids toys, kids activities, Christmas
* Ensure you are periodically checking and switching any service you can get cheaper (phone, internet, energy, health insurance, car insurance) and never auto-renewing (I'm UK based, so googling things for you, but this website might be a helpful comparison https://switcher.ie/)
* If you lose job #1, is there any money going out of the door that you would also no longer have to spend? e.g. travel, food, childcare etc.
Housing
At the moment at least your housing cost is low at €400. I know it's psychologically uncomfortable, but this is possibly a better deal than buying in at this stage - it all depends on what the mortgage would cost.
It is likely to be worth waiting for the job situation to resolve one way or another before committing to such a large expense (which is often hardest on the monthly budget in the first few years.)
Do you know what the deposit/mortgage requirements are going to be when you buy?
Investing
It's definitely possible to invest with €11,000 capital, but the question is what to put it in.
If you put it into Stocks & Shares, you should be prepared to leave the money in for 10 years (roughly, risk adjustable with bond/equities ratio) - but it looks like you may be needing those savings sooner for a house deposit.
Either way, these are not going to grow into a money tree any time soon, even with compound interest.
In my opinion, this is a lower priority at the moment, and you need to focus on increasing (or maintaining!) income and reducing expenditure, before focusing on where to put any excess.
Outside the box
"Could I take over my relative’s rental apartments and do Airbnb for her and have that be financially viable for both her and me? She’s retiring and has lost interest in the business."
* Definitely worth asking if you can take a cut in exchange for running this - that could boost your income if you lose the first part time job. Make sure you'll have a) time, b) thought of any hidden costs - e.g. travel, purchases.
* Secondly, I assume you'll be looking for other part time work to pick up. That's the most 'normal'/easy source of additional income.
* There are many 'side hustle' and 'boost your income' posts out there - e.g. https://www.moneysavingexpert.com/family/make-money and https://www.sidehustlenation.com/ideas/ - worth a look to see if any work for you in your local area.
Also, finally, to address "I’m bad at thinking mathematically."
There is very little math involved in this.
The key calculation is 'Am I spending as little as possible? Am I earning as much as possible?'
ysette9:
You need to get a better handle on your spending so you know how much and on what. Start tracking that immediately. I would recommend operating in a pre-emergency mode, because if you do lose your higher-paying job, you are in a very bad situation. Your €11,000 should be set aside somewhere safe like a bank account to be your emergency fund. Do not invest it because you are at risk of soon not having enough income to cover your expenses. If you are in that spot, you start dipping into your emergency fund to make up the difference.
Ultimately you have to bring in more income. Your budget doesn’t have enough wiggle room to bridge a €2000/month gap. Start looking now. Consider everything you are remotely qualified for. I realize you love what you do, but you need to consider sacrificing your stable part-time job in favor of a more stable full-time job. Your number one goal needs to be providing a financially stable environment for raising your children. That may mean making sacrifices and accepting better-paying, more stable work in something that isn’t as fulfilling for you.
anic:
Thanks aoedae for the considered response. I appreciate it. This is a breakdown of monthly expenses:
Monthly costs:
Yearly costs divided by month: €290 (Yearly costs include car tax €330, car insurance €850, car maintenance €500, refuse collection €365, oil €1000, subscription €65, birthdays €300 = €3410 divided by 12 months)
Rent €400
Electricity €76
Phone and Internet €86
Netflix €10
Petrol €90
Health insurance €79
Life insurance €35
Amnesty International €14
Childcare: €500
Food / Groceries: €500
Miscellaneous: €300
Total monthly expenses = €2380
I'm sure I'm forgetting certain things.
If I lose my main job, then I won't have childcare expenses which would save me 500 a month.
I can always get part-time work here and there. There's plenty of that around, it's just that (i) it wouldn't cover my expenses (ii) it would be very haphazard and only available from time to time (iii) it would be a very stressful way to live. Of course I'll do it... but it's exactly that type of life I want to avoid. There's probably no answer really to this.
Thanks for your thoughts on the housing and investments questions.
I'll keep going anyway...
anic:
Thanks Ysette9. Yes it's a serious situation that is stressing me out a fair bit. I replied above with a breakdown of my expenses so I know where it's going.
As for the job, I would love a secure full-time job. As it stands, the two part-time jobs are the only option for me and I'm lucky that I like the work. I'd rather have financial security than job satisfaction, since I have two young kids. I have my eyes and ears peeled for a new opportunity. I should have prioritised a higher paying career and been more strategic 20 years ago (I do have postgraduate degrees, just in case you think I was slacking!) but then ... my life would be different in other ways too. I'll teach my kids to be better planners than I was.
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