WWMD What would a mustachian do in this situation - Job Loss and COBRA burden

[SenecaTheYoungest]

Hello Mustachians,

I am looking for collective wisdom on where to go from here. Kind of like WWMD "What would a Mustachian do?"

We are not on the FIRE path although I have been contempating it for some time now. But recently our circumstances changed from thinking about FIRE to negative $5k cashflow/month. I am self employed and take in about $5,348/month after tax. My wife recently quit her job. This was not necessarily her choice as the company she was working for was a mess. Regardless we are now down about $50k in pre-tax income. On top of that I found out that our COBRA payments are over $2k/month. After a back of the napkin calculation I beleive we are a negative $5k/month cash-flow situation. I am starting to look at our budget for places to cut but between healthcare at $2k and our PITI at $2500 our monthly income is almost gone. We also have two kids but at least daycare is no longer an ongoing cost :/

What would a Mustachian do?

Thanks!

[ixtap]

Most financially responsible people wouldn't quit without a plan, usually having a new job lined up, but it is a bit late for that.

Is she looking for a new job or not?

You say you are bringing in $5300, housing is 2500, COBRA 2000. That leaves $800 for everything else, so you need to look at where that is going: by what you have told us there is no reason you should be negative by $5k/ month. Most people in the world don't spend that much after housing. Heck, the average American household only spends that much per month including housing.

If you can't figure it out yourself, try posting a case study, following the sticky instructions.

[seattlecyclone]

Right, COBRA is likely way more expensive than a plan you can get on the exchange. Take a look and see what the other options available to you are.

[SenecaTheYoungest]

Without getting into too much details she had to quit - health related reasons.

[SenecaTheYoungest]

Looks like I make too much to be on a subsidized plan (MN).

I was thinking COBRA becuase we already maxed everything out this year and I know we are going to have some more medical costs before the plan year resets.

Looking at MNSure plans it looks like once I get off cobra I can move to about $1000-1350/month with about $13000 max out of pocket for the year. I guess a family policy just costs about $12-$24k/year depending on usage. I think I need to look for other areas to save...

[maizefolk]

I am self employed and take in about $5,348/month after tax.

Looks like I make too much to be on a subsidized plan (MN).

Looking at MNSure plans it looks like once I get off cobra I can move to about $1000-1350/month with about $13000 max out of pocket for the year.

The threshold at which you'd stop being eligible for premium subsidies is 400% of FPL or $100,400 for a family of four (you, your wife, and two kids).

Converting your quoted monthly income to annual and taking a random stab and your and your children's ages, it looks like you would qualify for an ~$150/month premium credit for you and your wife, and your children would be covered by Minnesota's medicaid plan, (like Apple Health in Washington).

If you're worried about out of pocket maximums, you could get a $7,500/year plan (after subsidy) with a $2,400/year deductible and an $8,000/year OOP max. There are also much cheaper plants to cover your family (~$4,000/year after subsidy), but then you do have the $14,000/year OOP max.

[secondcor521]

There used to be the option to set up a "group" health plan for small businesses even if the "group" was two people and they happened to be husband and wife working for their own small business.  I do not know if this is still an option.

OP, you may be able to investigate this by calling your local Blue Cross office or similar and see if they'd be able to set you up on such a plan.  I'm not sure if these are cheaper or better than COBRA or ACA plans, but they used to be.

I believe this way the insurance premiums could be a deductible expense on Schedule C.

You'd have to hire your wife and pay her, but that is something you could probably figure out how to do.

[seattlecyclone]

Also if your MAGI is under 200% of the poverty level next year ($50,200 for a family of four), you will be eligible for MinnesotaCare. It's heavily subsidized, with premiums under $80/month per person and extremely low out-of-pocket costs. My mom was on that for a few years after my dad retired until becoming eligible for Medicare, and was quite happy with it. As your income isn't a whole lot higher than the threshold, you may find it worthwhile to save heavily in pre-tax retirement accounts in order to qualify for this.

[swampwiz]

Hello Mustachians,

I am looking for collective wisdom on where to go from here. Kind of like WWMD "What would a Mustachian do?"

We are not on the FIRE path although I have been contempating it for some time now. But recently our circumstances changed from thinking about FIRE to negative $5k cashflow/month. I am self employed and take in about $5,348/month after tax. My wife recently quit her job. This was not necessarily her choice as the company she was working for was a mess. Regardless we are now down about $50k in pre-tax income. On top of that I found out that our COBRA payments are over $2k/month. After a back of the napkin calculation I beleive we are a negative $5k/month cash-flow situation. I am starting to look at our budget for places to cut but between healthcare at $2k and our PITI at $2500 our monthly income is almost gone. We also have two kids but at least daycare is no longer an ongoing cost :/

What would a Mustachian do?

Thanks!

I'm quite curious as to how "self-employment" is known to be so exact.  Are you really a 1099 contractor that is basically working like an employee?  Once I know the true nature of your "self-employment" I can give better advice.

Also, I have no way of knowing what your costs actually are, so I wouldn't know how to hack away at it.  Based on the limited information you have divulged, your costs are at $10K/month, with $2K/month for COBRA and $2500/mo for the home.  Are your kids in private school?  There you go.  Have a talk with the headmaster about your financial troubles.  Your food/miscellaneous expenses - if done in a Moustachian way - should be no more than $1K (and that's being generous).  I suppose growing kids' clothes could be $200/mo?  $300 for your car (any more than that, you should get a CHEAPER CAR.  Throw in another $300/mo so that your kids don't feel like their parents are poor, and you're at $1800/mo outside of health care & your McMansion.  Because interest rates have risen, you probably won't be able to save much by buying & financing a cheaper home a bit more in the sticks.