Author Topic: Let's Play I Spy With This Article:How a Teacher in Tennessee Does Money [-$82k]  (Read 9822 times)

LPeters

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Obligatory link to article:

https://thebillfold.com/how-a-teacher-in-tennessee-does-money-fef9d8f43164#.f79senamn

All right, rules of the game.

1.) Pick through this non-judgmental and slightly coddling interview for hints of past financial mistakes. Bonus points for any rationalizations about these mistakes.

2.) Find any current and easily fixable foolish financial decisions. Again, bonus points for any rationalizations.

3.) Share your opinion about their student debt, how they got it and their totally foolproof plan to pay it back.

4.) Last, trauma and triage: what would you do in their shoes? What would you cut? What would you change?

No reward except the fun of a (hopefully) lively discussion.



I'd like to say that I really like thebillfold, and they have some very good articles on there. This one in particular, is basically just FU explained more eloquently:

https://thebillfold.com/a-story-of-a-fuck-off-fund-648401263659#.6okc5gnog


So I'm not picking on thebillfold, and I get that this series of articles is to give perspective, but ugh did it set off my Shame and Comedy alarms.

onlykelsey

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oh, yuck.  Soft, ego-protecting self-rationalizations are so dangerous.  I feel like I'm in versions of this conversation all the time.  And we're usually having it over a drink in Manhattan, and not a potluck at someone's apartment.

shotgunwilly

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Wow that was hard to stand.  Article should be called "Come to me and I'll justify all of your stupid mistakes, and possibly encourage you to make more of them."

onlykelsey

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I think one of the reasons that article/similar conversations bother me so much is that these people are clearly justifying bad personal choices by pointing to broader societal problems, which makes the broader societal problems seem like they don't exist.  Like, for-profit government-backed Sallie Mae-style lending is a serious problem that needs addressing, but that's not her problem.  Her problem is bad personal choices (and horrific choice in partner, it seems).

LPeters

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Whoa! That interviewer need to be shot and then pissed on!

Keeps telling her they are doing great with the resources they have and justifies every stupid move!

$1000/month for food!! Husband is picky re: crockpot meals....
Counting on student loan forgiveness!
New clothes, more new clothes, and more new clothes!
New flatscreen!

That is just what she remembers! How much other spending are they not even aware of?
And the new $600 flat screen was brought with student loan money. But not the clothes! Oh no. They were stupid, but not that stupid, she has to clarify.

cats

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Funniest part for me is where the interviewer tries to justify the TV as a "necessity" because their old TV would have been obsolete soon anyway.  WHAT?  Even if they are living a bare bones lifestyle with no internet, there is this thing called "the radio" for getting news, and this other thing called "the library" for getting out movies or TV shows or even "books" if you don't have a screen and DVD player available.


TheOldestYoungMan

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Re: the bit about not being able to get the converter box to work for digital tv:

http://www.boomclips.com/videos.aspx/video~digital_tv_conversion_for_old_people/Digital_TV_Conversion_For_Old_People/Funny_videos/

But I felt a little mean playing the game.  Personal finance needs to be a major track in high school, 4 years of study considered just as important as math or science.

Gone Fishing

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I'll skip to #4.

Doesn't say if she is working summers or not.  If not, that could be a big shot in the arm.

Not including meals out, at $600+ for groceries for three (one of which barely eats) they are not cooking, they are heating things up. To fix someone like that you would need to take them grocery shopping, show them what to buy and how to cook it.   

Refi the house.

Start saving for a new car.

 

StarBright

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I suspect there may be some interesting gender role things at play here as well with the husband being the main childcare provider and her being the main breadwinner.

I know multiple couples like this (and have also been the main breadwinner in our family for years) and I see this all the time: real issues and tiptoeing around the stay at home spouse in regards to treats (flat screen or video games) and how much they are willing to do (ie. Watch the kids and do some light cleaning but puts foot down at cooking because "too tired").

I'm not saying it is right but this whole scenario rings very true. At some points you just let things slide to keep harmony and balance in this new wacky world of changing gender roles :)

In the spirit of babysteps - I think the first small thing they could to help themselves at this point is actually doing a few freezer meals that are not of the crockpot variety or in their case it might even work in their favor to one of those assemble and freeze places just to start them off.

Additionally  - I think the Billfold authors purposefully aim for the very non-judgmental tone because the first step is getting people to simply discuss their money. Also, if you haven't read their Harry Potter "How wizards do money" series, please check it out - it is very sweet.

mm1970

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This was very interesting to me too.  I have to wonder how things have changed over the years.

She's 30, so 15 years younger than me.  I was a poor kid from a frugal family too.  I went military, so I only borrowed about $11-$12k (back in the 80's/90s), but if I hadn't, then I was probably looking at $40k.  That doesn't seem to be too far off of $82k, for someone 15 years younger.

Maybe my memory is fuzzy, but I don't exactly remember getting loan checks.  I think they all went directly to the school.  So, this ability to use them to buy a TV, that just makes no sense to me.  I do remember this one thing though:
I didn't really know about ROTC until right before college.  So I didn't know about scholarships.  I joined ROTC as a freshman and applied for a 3 year scholarship
I got the 3 year scholarship, but had problems with the physical. Namely, I scheduled my physical in Pittsburgh over the summer between Freshman and Soph years.  This is a 2 hour drive.  But the problem is that one of the doctors called in sick, so I was missing some info. 
Because of that, I needed a special release form. 
The Navy, therefore, did not pay my tuition for a few months after the start of the school year.
The school wanted *some* payment.  So essentially, I wrote them a check for $3000, which was the sum total of the money I had from working 2 jobs, a total of 60 hours a week, over the summer (at $4.00 and $3.35 and hour, whee!)
Sadly, I never got that money back.  Once the Navy paid, I had "extra" in my account, so they sent the loan money back to the bank.  Okay, maybe that was a good thing, but eating was pretty tight those few months.  Luckily I worked 3-4 days a week in the campus pizza place and got a free meal when I did.

So, loan checks, sent directly to the people - is this a new thing, or has it always been a thing?

The eating out and groceries thing.  This is normal, but it needs work.  Even as old as I am, I did not learn to cook until I was 32.  My mom cooked.  My older sisters cooked.  I did not.  In 2001, when I finally started looking at finances (I was 31, husband still in grad school, I was working), we were spending $460/mo on groceries and $400/mo on eating out.  That is NORMAL.  Most people don't really think about it at all.  It takes work.

And it also takes baby steps to realize how you can save money.  My husband and I are frugal and have never lived outside our means - have always been able to pay the bills.  But we've gotten better at it over the years.  First step is to take an interest in it.  (Same with any topic.  Eating healthfully, learning to cook.)

I really think that the loss of "Home Ec" - eating healthfully, learning to cook, learning to budget - at the high school level is a bad thing.  My parents hated debt, so at least in college I was a total cheapskate.  I couldn't afford it, I didn't get it. Man, I had a group project for an engineering class - and the two other kids in my group were "rich" to me.  One of them was going to school tuition free because her dad worked there, and the guy's parents were paying.  They decided to have our final report bound at Kinkos, back when that wasn't a thing.  Color too.  They told me I owed them $20.  I said "if I had $20, I'd buy food.  You noticed i'm eating ramen, right?"

« Last Edit: January 21, 2016, 10:10:20 AM by mm1970 »

Gondolin

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Counting on student loan forgiveness!

Nothing wrong with taking advantage of Public Work loan forgiveness, it's there to be taken advantage of. She's the perfect candidate (even if she spent loans on stupid stuff), a public school teacher making <$40k a year.


That said, the interviewer is _really_ soft balling the questions. As in, I can't tell if this is an interview or a therapy session. The interviewee seems to want to acknowledge all her mistakes and waste but, the interviewer just rolls over her tells her she's doing great again and again.

+1 to odd gender dynamics here too. If "he's picky" and works part-time....he can cook for himself? Am I rite?

onlykelsey

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+1 to odd gender dynamics here too. If "he's picky" and works part-time....he can cook for himself? Am I rite?

Odd gender dynamics, indeed.  He sounds like a jerk. 

That said, young children seem to be dirt machines who delight in destroying things, so I can understand the being tired at the end of the day.  But not the cable or TV or basically anything other position of his.

Travis

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"Itís supposed to be the good debt!"    -   "Good debt" isn't an actual, technical, legally-binding financial term.  It's there to make us feel better about debt that should have a return on investment. A mortgage underwriter doesn't give a shit how you got the debt, just that your debts exceed your income by 100%.

"I took out more loans than I needed to because we were so bad at managing our money."  - At least she's honest here.

"You were, in fact, doing exactly what people wanted you to do."  Which people?  The "system" is not in place for you to HOPE you can wait out your loan obligations. I get that the "become a teacher and we'll take care of it" is an established system, but crossing your fingers that the program continues to exist for another 7 years is not a plan.

"Iíd argue that you need enough clothes that you can go two full weeks without repeating an outfit."  Never heard of a washing machine?

"Obviously a lot of people get by on less clothing than that...but until you have that much clothing, all clothing you buy is necessary"  If people can get by on less, then more is not necessary.

"making most old-school TVs obsolete"  User-level ignorance doesn't mean obsolete.

"No-interest is good, though! Better than interest, LOL." Is the interviewer 12 years old?

"but you arenít living ridiculously outside your means (even when you buy on credit youíre doing it because of a specific, necessary purchase),"  - Okay, not 12. Just an idiot.  This person is supposed to be a "financial expert?"


The interviewee's entire financial future depends on discharging her student loans.  They're barely keeping their heads above water and have no other plans to change that outlook for at least 5 years. And the interviewer thinks it's cute.  They went into credit card debt to pay for a home and car repair they hope will be paid off in a year.  She states clearly paying lip service payments to her student loans, and briefly mentions a credit card balance.  I wonder if she's got more than just those two repair bills on the balance?
« Last Edit: January 21, 2016, 12:26:49 PM by Travis »

FIPurpose

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This was very interesting to me too.  I have to wonder how things have changed over the years.

She's 30, so 15 years younger than me.  I was a poor kid from a frugal family too.  I went military, so I only borrowed about $11-$12k (back in the 80's/90s), but if I hadn't, then I was probably looking at $40k.  That doesn't seem to be too far off of $82k, for someone 15 years younger.

Maybe my memory is fuzzy, but I don't exactly remember getting loan checks.  I think they all went directly to the school.  So, this ability to use them to buy a TV, that just makes no sense to me.  I do remember this one thing though:
I didn't really know about ROTC until right before college.  So I didn't know about scholarships.  I joined ROTC as a freshman and applied for a 3 year scholarship
I got the 3 year scholarship, but had problems with the physical. Namely, I scheduled my physical in Pittsburgh over the summer between Freshman and Soph years.  This is a 2 hour drive.  But the problem is that one of the doctors called in sick, so I was missing some info. 
Because of that, I needed a special release form. 
The Navy, therefore, did not pay my tuition for a few months after the start of the school year.
The school wanted *some* payment.  So essentially, I wrote them a check for $3000, which was the sum total of the money I had from working 2 jobs, a total of 60 hours a week, over the summer (at $4.00 and $3.35 and hour, whee!)
Sadly, I never got that money back.  Once the Navy paid, I had "extra" in my account, so they sent the loan money back to the bank.  Okay, maybe that was a good thing, but eating was pretty tight those few months.  Luckily I worked 3-4 days a week in the campus pizza place and got a free meal when I did.

So, loan checks, sent directly to the people - is this a new thing, or has it always been a thing?

The eating out and groceries thing.  This is normal, but it needs work.  Even as old as I am, I did not learn to cook until I was 32.  My mom cooked.  My older sisters cooked.  I did not.  In 2001, when I finally started looking at finances (I was 31, husband still in grad school, I was working), we were spending $460/mo on groceries and $400/mo on eating out.  That is NORMAL.  Most people don't really think about it at all.  It takes work.

And it also takes baby steps to realize how you can save money.  My husband and I are frugal and have never lived outside our means - have always been able to pay the bills.  But we've gotten better at it over the years.  First step is to take an interest in it.  (Same with any topic.  Eating healthfully, learning to cook.)

I really think that the loss of "Home Ec" - eating healthfully, learning to cook, learning to budget - at the high school level is a bad thing.  My parents hated debt, so at least in college I was a total cheapskate.  I couldn't afford it, I didn't get it. Man, I had a group project for an engineering class - and the two other kids in my group were "rich" to me.  One of them was going to school tuition free because her dad worked there, and the guy's parents were paying.  They decided to have our final report bound at Kinkos, back when that wasn't a thing.  Color too.  They told me I owed them $20.  I said "if I had $20, I'd buy food.  You noticed i'm eating ramen, right?"

Yes I started college in 2009. Every year, if there was extra money in my account from loans or scholarship, the school wrote me a check. This is because schools now track cost of living as full-time school expenses. You are allowed to take out loans to those amounts. So definitely, students make very bad decisions when they are handed a $3,000 check at the beginning of a semester.

kiwigirls

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I suspect there may be some interesting gender role things at play here as well with the husband being the main childcare provider and her being the main breadwinner.

I know multiple couples like this (and have also been the main breadwinner in our family for years) and I see this all the time: real issues and tiptoeing around the stay at home spouse in regards to treats (flat screen or video games) and how much they are willing to do (ie. Watch the kids and do some light cleaning but puts foot down at cooking because "too tired").

I'm not saying it is right but this whole scenario rings very true. At some points you just let things slide to keep harmony and balance in this new wacky world of changing gender roles :)

I totally agree with this.  I see it/read about it often..  She needs to get him on board - cooking, cleaning, childcare are the staples of the stay at home parent regardless of gender.

In the spirit of babysteps - I think the first small thing they could to help themselves at this point is actually doing a few freezer meals that are not of the crockpot variety or in their case it might even work in their favor to one of those assemble and freeze places just to start them off.

Additionally  - I think the Billfold authors purposefully aim for the very non-judgmental tone because the first step is getting people to simply discuss their money. Also, if you haven't read their Harry Potter "How wizards do money" series, please check it out - it is very sweet.

AH013

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Some of my favorites...
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I worked during school, but it didnít really cover living expenses, so I used loans to fill in the gaps. I had no idea what I was getting myself into, and Iím embarrassed by that giant number, but my husband is cool with it and we have a plan (that depends on the government not overturning the Public Student Loan Forgiveness Act, unfortunately), so I try not to freak out and am working on forgiving myself for being so stupid with our money.
Actually, since you're entire plan is to not pay down the balance and wait until it's discharged, you were being stupid with MY money (as a taxpayer going to shoulder the debt that'll be written off under your plan).

Quote
This month we have spent $662 on groceries, and $347 dining out. For two adults and a two-year-old...Last month it was about $650 though
Holy hell, your average food budget is $1000-$1300 a month when your gross income is $4000 a month?!?  No, I don't possibly see how you could make a dent in your student loans.  It wouldn't physically be possible to spend, say $300 a month for your 3 person family, and throw an extra $800/month at those loans and see them disappear in 5 years...nope!

Also, I'd like to not even BS about how much "part-time work" her husband does.  Salary for a school teacher in Chattanooga with her experience should be $46-53k, but let's even go and say she makes the starting salary of $43k, so to get you to your $48k household income your husband works what?...even at minimum wage that's about 13 hrs/wk.  I'd smash the absolute #&$* out of that $600 TV he wanted to buy, because clearly he's loafing on the couch a lot watching it during her 10 hour workdays.

Gondolin

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"You were, in fact, doing exactly what people wanted you to do."  Which people?

+1 This line made me spit blood. So vague and nonsensical.

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A LOT of things can happen that could result in this program not being available seven years from now. She's admitted that the current payments make essentially no headway against the debt, if the program is lost, they are so screwed....

Such as? Don't get me wrong -  We completely agree in principle. Banking on external policy to provide an escape hatch years down the line with no alternative or Plan B is not a great plan. However, the PSLF seems so low cost to the government, so politically popular and so non-controversial that I'm having trouble envisioning it being dismantled. Obviously, there's political noise about every budget cycle and they could go do something dumb like cap the forgiveness amount. Otherwise....I don't know. We'll know more when they actually start forgiving in 2017. I suppose the DoEd could find a way to muck that up too.

Hmm...looks like I answered my own question.

Travis

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"You were, in fact, doing exactly what people wanted you to do."  Which people?

+1 This line made me spit blood. So vague and nonsensical.

Quote
A LOT of things can happen that could result in this program not being available seven years from now. She's admitted that the current payments make essentially no headway against the debt, if the program is lost, they are so screwed....

Such as? Don't get me wrong -  We completely agree in principle. Banking on external policy to provide an escape hatch years down the line with no alternative or Plan B is not a great plan. However, the PSLF seems so low cost to the government, so politically popular and so non-controversial that I'm having trouble envisioning it being dismantled. Obviously, there's political noise about every budget cycle and they could go do something dumb like cap the forgiveness amount. Otherwise....I don't know. We'll know more when they actually start forgiving in 2017. I suppose the DoEd could find a way to muck that up too.

Hmm...looks like I answered my own question.

Doesn't the program require you to be employed at a particular job for a certain number of years?  What if she's laid off or decides to pick up and move? Could that disrupt her qualification for the loan repayment?

arebelspy

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This was my favorite part:
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I am also surprised that student debt would count against you like that. Itís supposed to be the good debt!
Right? I was so shocked!

Maybe if you don't understand how they calculate if you're eligible for a mortgage (hint: figure out what DTI means), you should wait to apply for one until you do understand more about the whole process.

Yes, your student loan counts against you, because the bank wants to make sure you can make your payments, and the amount of other payments you have to make (like student loan payments) affects that.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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LPeters

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"You were, in fact, doing exactly what people wanted you to do."  Which people?

+1 This line made me spit blood. So vague and nonsensical.

Quote
A LOT of things can happen that could result in this program not being available seven years from now. She's admitted that the current payments make essentially no headway against the debt, if the program is lost, they are so screwed....

Such as? Don't get me wrong -  We completely agree in principle. Banking on external policy to provide an escape hatch years down the line with no alternative or Plan B is not a great plan. However, the PSLF seems so low cost to the government, so politically popular and so non-controversial that I'm having trouble envisioning it being dismantled. Obviously, there's political noise about every budget cycle and they could go do something dumb like cap the forgiveness amount. Otherwise....I don't know. We'll know more when they actually start forgiving in 2017. I suppose the DoEd could find a way to muck that up too.

Hmm...looks like I answered my own question.

Doesn't the program require you to be employed at a particular job for a certain number of years?  What if she's laid off or decides to pick up and move? Could that disrupt her qualification for the loan repayment?

No, it isn't a particular job, but it has to be a public service job with 10 years worth of income adjusted payments. I think.

Here're some informative articles off the top of my head:

http://thefinancialdiet.com/10-honest-questions-answers-about-the-public-service-loan-forgiveness-program/

http://thefinancialdiet.com/why-i-decided-against-participating-in-the-public-service-loan-forgiveness-program/

http://thefinancialdiet.com/everything-i-learned-from-four-years-in-the-public-service-loan-forgiveness-program/

Spiffsome

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Anyone else notice where the interviewer says, "you've done everything right ... some people could nitpick"?

Nitpicking is where the returns are at! Your budget waste doesn't come in a giant chunk with a big sign on it saying 'Waste', it's all of the little wastages adding up. Little here, little there, and suddenly you're spending $350/month on eating out!

Robert Bell talks about this at http://livingstingy.blogspot.com.au/2010_01_01_archive.html

MrsPete

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I had spent a couple years cleaning up our credit reports, but he had an old credit card that had gone to collections. I was sure it would count heavily against him, and he was approved by himself for the loan!
Okay, first stupid thing I noticed:  She doesn't realize that pretty much anyone can get a mortgage -- people with bad credit just get higher interest rates.  She doesn't seem to grasp that interest rates make a big difference in what you pay in the long run. 

I try so hard to pretend it doesnít exist. I owe about $82K, all federal loans

Yeah, 'cause pretending things don't exist is a great method for furthering your finances.
She claims she didn't attend an expensive school, so how'd she spend 82K on a teaching degree?  First, teaching is a degree that offers LOADS of scholarships.  Second, she's in TN, a low cost of living area -- we're one state over, and IF I'd paid my daughter's college tuition at "rack rate" it would've cost under 50K for tuition, books, on-campus housing and food. 
I had no idea what I was getting myself into
Idiot.
I grew up in a very low-income household, so it was hard to tell myself no when I was out on my own.

Yeah, one of my siblings is throwing herself a party to make up for our teenaged years.  Idiot.  We can't help where we came from, but we don't have to stay there.
Iím so embarrassed to say it! We bought a new TV once. The old one was technically still working, but it was one of those big old tube TVs, and I didnít think we needed a new one. But my husband won the argument. This was in 2009Ė2010 so we spent about $600 on a flat-screen.

Um, I'm in the two-comma club, and I don't have a $600 TV.  Yet somehow life goes on.
Clothes are something I struggle with. I had to buy a bunch of maternity clothes when I got pregnant, and they had to be things I could teach in. Then I had to buy non-maternity teaching clothes that I could easily pump in. I got down to pre-baby weight and then gained 10 lbs back, so I had to buy even MORE clothes.
Okay, this isn't the worst thing she's done.  If you choose to have a baby (which she chose to do too soon -- before she was financially ready), maternity clothes are a need, and a new mom's weight does go up and down.  However, I owned exactly ONE item of maternity clothing that didn't come from a yard sale or consignment store -- since these items are used for a short time, they're widely available used.
I would love to cut our food expenses, but honestly in this season of our life, we just need someone else to cook sometimes. I work 10-hour days a lot, and it is hard to cook every night.

Okay, I get it.  The first few years of teaching are ROUGH, and having a two year old is constant work ... but she has options between over-spending and spending hours cooking.  For example, she could prepare multiple casseroles (not much more work than making one) and freeze them ... or she could buy a $5 Stouffers' lasagna ... or she could get grocery store deli take-out.  Any of those choices are cheaper than going out to dinner.

Yeah, loads of rationalizations ... but I think the interviewer was giving just as many excuses:  You couldn't have done any better.  You were just doing what the evil establishment wants you to do.  You needed those things! 








MrsPete

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Doesn't say if she is working summers or not.  If not, that could be a big shot in the arm.

Not including meals out, at $600+ for groceries for three (one of which barely eats) they are not cooking, they are heating things up. To fix someone like that you would need to take them grocery shopping, show them what to buy and how to cook it.   
Yes, teachers have lots of opportunities to pick up small jobs here and there -- not necessarily high paying jobs, but tutoring, after-school care, grading standardized testing -- lots of things.  In her defense though, a typical teacher's first three years are NON-STOP and very hard.  Everyone seems to be the same:  After three years, suddenly everything "clicks" and the job becomes easier.  You're in the groove of things.  You're better at classroom management.  You've built up lesson plans and tests so everything doesn't have to be created from scratch every week.  Really, I can understand someone in the first three years not having the wherewithall to add on extra work -- at least during the school year.

A person spending that much at the grocery store is either not cooking enough (heating up, as you say) or is cooking too much -- meaning that they're buying expensive ingredients like vanilla beans and expensive wine and /or they're "investing" in expensive cooking equipment. 
Yes, your student loan counts against you, because the bank wants to make sure you can make your payments, and the amount of other payments you have to make (like student loan payments) affects that.
It's hard to believe that educated people understand loans so poorly.
Also, I'd like to not even BS about how much "part-time work" her husband does.  Salary for a school teacher in Chattanooga with her experience should be $46-53k
You can find loads of "estimates" of teacher salaries online, but if you check the Hamilton County teachers website (http://www.hcde.org/?PN=Pages&SubP=Level1Page&L=2&DivisionID=14293&DepartmentID=0&SubDepartmentID=0&PageID=20791&ToggleSideNav=), it says that a third year teacher with a bachelor's degree earns $36,765/year.  What'd she say they earn?  48K?  So he's earning about 11K/year at home.  Okay, he's caring for a child at the same time, but still ... that's not much.  With time available to him (and she has flexible afternoons), they may not be able to earn more ... but they should have time to do things themselves that could save money. 
« Last Edit: January 21, 2016, 08:06:49 PM by MrsPete »

teen persuasion

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Quote
I bet if I asked you how much you spent on eating out every month, Iíd get a figure that was relatively small, and possibly equivalent to grocery costs. Less than $300, right? Thatís my educated guess.
This month we have spent $662 on groceries, and $347 dining out. For two adults and a two-year-old.
Okay, so my estimate was $47 dollars short.
Haha. I would have thought it was more, actually. Last month it was about $650 though, which included a 6-day road trip and a separate week-long visit with out-of-town friends.



This was my favorite part.
 
Interviewer asks for amount spent every month on eating out, guesses relatively small = $300. 
Teacher responds with last month = $347, but total food costs over $1k. 
Interviewer completely ignores total cost and pats herself on back at her accurate guess. 
Teacher then admits other months are much worse. 
Interviewer ignores.

This excerpt was one of the only parts with actual numbers, and they were completely shocking to me.  Eating out for $300 is relatively small?  Not if you are broke (or have better things to do with your money).  From the teacher's comments about them eating out frequently, I'd guessed that their grocery bill would be smaller (little eaten/cooked at home), not double!  I've got 5 kids, even when all were home (lots of teens), I've never spent more than $400/month on food.  Toddlers added little to our grocery bills, so that's essentially for 2 adults. 

I did the SAHM thing for years, I'm sorry, making dinner is part of deal (trading unpaid household labor for a second income minus extra expenses like childcare and cooking/cleaning).  In fact, when we had our first, and did the math on SAHM vs daycare, I decided the more the merrier - I provided childcare for another family.  Then I had another, then they had another, so i was up to 4 kids under 4 years old.  Still made dinner every night.

Things are much busier now with teens than with toddlers, because of outside activities, and I'm working part-time.  On the days we both work until dinnertime, and have to get back out to some evening event, I prep a quick and easy dinner beforehand.  If I am lucky, and DS4 goes home after school (no sports that season, like now) he can at least begin cooking for me.  Usually everything is done and on the table.  If a (male) teen can cook, a SAHP can.

cats

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Okay, I went through and read the article in more detail and have more thoughts....

Mainly, the article was just not very clear on what this couple's long term financial goals are, which makes it really hard to determine if their decisions are "not frugal, but not out of line relative to their goals", or "HAIR ON FIRE VOLCANO TIME".

Some arguments that they might not actually be doing that badly:

-They don't actually have a huge mortgage debt ($60k). 
-Her loans are substantial BUT there is a program in place that will forgive most of them so I don't think it's that stupid of her to only pay the minimum...and so many people are taking advantage of that program I doubt it will just be completely yanked in the next 5-10 years.  It might be adjusted or no longer available to new grads, but I doubt she is going to wake up one morning needing to pay $1000/month with no prior warning.
-They do have a credit card debt but it's zero interest and it sounds like they have a plan in place to pay it off before interest kicks in, plus she says the car/AC repair would have wiped out their savings, not that they didn't have the savings available...so it sounds like if they needed to, they could wipe out their savings and pay off the balance that way.

The thing that really glared out at me is that it looks like their only vehicle for retirement savings is her 403b and that she hasn't thought about upping contributions.  They could probably benefit from sitting down and thinking about when they want to retire and how much money they'll need and then work on increasing her contributions accordingly, or eventually setting up non-retirement accounts if her 403b will not be enough.  Does the billfold ever set these folks up with a retirement advisor or anything like that?

From a MMM-style perspective, they do sound pretty much one emergency away from getting into a deep hole (the fact that they needed a credit card to deal with broken AC+broken car...yikes).  It sounds also like the husband might be a bit of a spendthrift and, frankly, a jerk ("he's picky" so they can't do crockpot meals?  WTF?), and that her solution to this so far has been to kind of give in (he wins the argument about the TV, he is winning the argument about cutting back on food expenses, etc).  I have no idea what the rest of their marriage is like but it sounds like a situation where if she is going to be facing an uphill battle if she tries to make any big changes to their financial situation, which sounds like a recipe for marital unhappiness.  I would really love to know what kind of a discussion they had about him becoming a SAHD and working only part-time...I know it can be a great decision for some couples (my husband and I are also considering it!) but from the interview I sort of suspect he may have pushed for it and "won" that argument as well...

FIPurpose

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Alright read over the article. I actually like the program, though I do think it a bit risky to be basically all-in on a government loan forgiveness program. Odds are low that it would get cut, but she does get an amazing payout for completing it. $82k tax-free. And she says that her portion of the program is putting in ~$24k over the 10 years. Not a bad deal for a teacher.

As much as this article does whine, I do think she is doing better than the average American and at least has a plan to become debt free even if it isn't perfect. Some silly consumerism, but over all I think she'll be fine and live a good life.

randymarsh

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She must have a graduate degree, because I don't think you can borrow 82K in government loans without the Direct  PLUS loan. Stafford and Perkins loans max out at around ~50K or less I believe.

The public student loan forgiveness program is interesting because to get the most benefit, the logical thing to do is borrow basically as much as possible for your schooling. You'll pay a fraction of what you originally borrowed as long as your income doesn't reach amazing levels. 

A couple with 2 kids that each owes 200K in Direct PLUS loans (400K total) and makes 100K combined can get a repayment plan that's as little as $317/month. For non-public service employees, the remaining balance would be forgiven after 20 years (taxable however). The forgiven amount is $380K! But these are teachers. The debt will be forgiven after just 10 years and it's not taxable.  They'll end up paying around 50K for a 400K education!

MrsPete

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The public student loan forgiveness program is interesting because to get the most benefit, the logical thing to do is borrow basically as much as possible for your schooling. You'll pay a fraction of what you originally borrowed as long as your income doesn't reach amazing levels. 
Logical in that it might allow you as an individual to grab as much cash as possible from the public coffers. 
However, it's a questionable moral choice (purposefully being wasteful because it's not your money), it locks you into staying in the low-paying job that offers forgiveness, and you run the risk of the forgiveness program ending before you "get yours" -- something that could easily happen if a bunch of people adopt this thought process. 

randymarsh

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The public student loan forgiveness program is interesting because to get the most benefit, the logical thing to do is borrow basically as much as possible for your schooling. You'll pay a fraction of what you originally borrowed as long as your income doesn't reach amazing levels. 
Logical in that it might allow you as an individual to grab as much cash as possible from the public coffers. 
However, it's a questionable moral choice (purposefully being wasteful because it's not your money), it locks you into staying in the low-paying job that offers forgiveness, and you run the risk of the forgiveness program ending before you "get yours" -- something that could easily happen if a bunch of people adopt this thought process.

Oh absolutely. I wonder if there will be fallout from all the new income based repayment plans. That, and the rise of refinance options like SoFi. The government has a loan portfolio worth over a trillion dollars. I've read that default rates continue to rise. Individuals with the income and know how will look at refinance options, leaving the government with borrowers with weak credit and incomes.


YoungInvestor

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Honestly, just get higher income. There's nothing insane there, but they just don't make enough money to pay for an average lifestyle. Making 48k for 2 people is way too low.

The part-time working husband should get another job.

cavewoman

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Okay, I went through and read the article in more detail and have more thoughts....

Mainly, the article was just not very clear on what this couple's long term financial goals are, which makes it really hard to determine if their decisions are "not frugal, but not out of line relative to their goals", or "HAIR ON FIRE VOLCANO TIME".

Some arguments that they might not actually be doing that badly:

-They don't actually have a huge mortgage debt ($60k). 
-Her loans are substantial BUT there is a program in place that will forgive most of them so I don't think it's that stupid of her to only pay the minimum...and so many people are taking advantage of that program I doubt it will just be completely yanked in the next 5-10 years.  It might be adjusted or no longer available to new grads, but I doubt she is going to wake up one morning needing to pay $1000/month with no prior warning.
-They do have a credit card debt but it's zero interest and it sounds like they have a plan in place to pay it off before interest kicks in, plus she says the car/AC repair would have wiped out their savings, not that they didn't have the savings available...so it sounds like if they needed to, they could wipe out their savings and pay off the balance that way.

The thing that really glared out at me is that it looks like their only vehicle for retirement savings is her 403b and that she hasn't thought about upping contributions.  They could probably benefit from sitting down and thinking about when they want to retire and how much money they'll need and then work on increasing her contributions accordingly, or eventually setting up non-retirement accounts if her 403b will not be enough.  Does the billfold ever set these folks up with a retirement advisor or anything like that?

From a MMM-style perspective, they do sound pretty much one emergency away from getting into a deep hole (the fact that they needed a credit card to deal with broken AC+broken car...yikes).  It sounds also like the husband might be a bit of a spendthrift and, frankly, a jerk ("he's picky" so they can't do crockpot meals?  WTF?), and that her solution to this so far has been to kind of give in (he wins the argument about the TV, he is winning the argument about cutting back on food expenses, etc).  I have no idea what the rest of their marriage is like but it sounds like a situation where if she is going to be facing an uphill battle if she tries to make any big changes to their financial situation, which sounds like a recipe for marital unhappiness.  I would really love to know what kind of a discussion they had about him becoming a SAHD and working only part-time...I know it can be a great decision for some couples (my husband and I are also considering it!) but from the interview I sort of suspect he may have pushed for it and "won" that argument as well...
I know I can't really read much into their relationship from this one article, but something leads me to believe she's using her husband as a scapegoat for their mutual bad decisions.  Like you said, WTF if he's picky then he can plan the crock-pot meal.  That's a non-excuse excuse.  And I doubt she argued too hard against the TV, if at all.

cats

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From a MMM-style perspective, they do sound pretty much one emergency away from getting into a deep hole (the fact that they needed a credit card to deal with broken AC+broken car...yikes).  It sounds also like the husband might be a bit of a spendthrift and, frankly, a jerk ("he's picky" so they can't do crockpot meals?  WTF?), and that her solution to this so far has been to kind of give in (he wins the argument about the TV, he is winning the argument about cutting back on food expenses, etc).  I have no idea what the rest of their marriage is like but it sounds like a situation where if she is going to be facing an uphill battle if she tries to make any big changes to their financial situation, which sounds like a recipe for marital unhappiness.  I would really love to know what kind of a discussion they had about him becoming a SAHD and working only part-time...I know it can be a great decision for some couples (my husband and I are also considering it!) but from the interview I sort of suspect he may have pushed for it and "won" that argument as well...
I know I can't really read much into their relationship from this one article, but something leads me to believe she's using her husband as a scapegoat for their mutual bad decisions.  Like you said, WTF if he's picky then he can plan the crock-pot meal.  That's a non-excuse excuse.  And I doubt she argued too hard against the TV, if at all.

I could see that being the case also, now that you mention it.  Actually, now that I think about it, it's a little weird to have an interview with someone who has a shared financial situation, and not include the other person in the interview!

Making Cookies

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.
« Last Edit: January 24, 2016, 05:16:35 PM by Jethrosnose »

Rural

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.


You're looking at a different program.


https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service




serpentstooth

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Here's the thing the teacher doesn't realize. Most people don't go broke buying gold plated yachts staffed with bikini clad supermodels serving caviar and champagne. They go broke buying fairly reasonable stuff that is easy to justify. It's not nuts to buy a meal out or a maternity dress or a television. What's killing them (and will ultimately make a lot of mustachians rich) is a slow drip-drip-drip of expenses or economies that over time turn into a tidal wave. Any one of their purchases are justifiable. It's when you add them all together that it becomes way beyond their means and it's a huge problem.

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Here's the thing the teacher doesn't realize. Most people don't go broke buying gold plated yachts staffed with bikini clad supermodels serving caviar and champagne. They go broke buying fairly reasonable stuff that is easy to justify. It's not nuts to buy a meal out or a maternity dress or a television. What's killing them (and will ultimately make a lot of mustachians rich) is a slow drip-drip-drip of expenses or economies that over time turn into a tidal wave. Any one of their purchases are justifiable. It's when you add them all together that it becomes way beyond their means and it's a huge problem.

If I was going to go broke, I would want there to be at least one yacht party with bikini clad models and caviar. Going broke over a bunch of chickenshit day-to-day expenses would make me sad.

Lski'stash

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This was my favorite part:
Quote
I am also surprised that student debt would count against you like that. Itís supposed to be the good debt!
Right? I was so shocked!

Maybe if you don't understand how they calculate if you're eligible for a mortgage (hint: figure out what DTI means), you should wait to apply for one until you do understand more about the whole process.

Yes, your student loan counts against you, because the bank wants to make sure you can make your payments, and the amount of other payments you have to make (like student loan payments) affects that.

I'm not sure about this- from either point of view.

I'm in a similar spot right now. I am a teacher on the PSLF program, who also happens to be buying a house. I pay $282 per month on the loan, and the balance is around $68,000 (it has actually gone up because I pay so little.) I just printed off a sheet from the website to give to the bank and explained my loan situation. My husband and I were approved for our new house, non-contingent on the sale of a our current house, with the lowest interest rate available (3.165% on a 15 year mortgage).

We also don't have cc debt anymore since finding MMM, and save 36% of our income, and our selling our house to move into a smaller one closer to work to be able to save a boatload more. My husband also makes more than I do, so the incomes are different.

Honestly, I agree that the interview is very 'oh, poor you' and 'oh, your situation sounds just fine,' when we (the mustachians)know there is much work to be done there. BUT for a non-mustachian who hasn't found this website, they seem to be doing alright. At least she knows about the PSLF program. So many people who qualify for it have no idea that it even exists!

randymarsh

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.

There are 2 separate programs. The public service one is way more open than people think. You qualify if you work for any government agency, non-profit, school, etc. 10 years working for one of those (at any salary) and you can get any remaining balance forgiven.

TheGrimSqueaker

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.

There are 2 separate programs. The public service one is way more open than people think. You qualify if you work for any government agency, non-profit, school, etc. 10 years working for one of those (at any salary) and you can get any remaining balance forgiven.

So, I could found a non-profit of some sort, the "Habitat for Halibut" perhaps, get tax exempt status (requires a wait of ~18 months to 2 years in some cases), run a trivial program of some kind, pay myself a dollar a year as the Executive Director, hold a few car washes to make enough dough to repay what we spent on the IRS filing fee, and after ten years of that kind of bullshit my student loans would go away?! Holy crap. Where do I sign up?

I'm not asking for myself: I have no student loans. But I run a sports non-profit, and would love to get some overeducated schmuck to do grunt work for me, and pay them pocket change so they can write off that debt. I'll call them the Executive Director and Vice President of Bugger-All. We need our Web site redone, everyone else is busy accomplishing stuff, and I don't feel like paying for talent. This could be brilliant.

Psychstache

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.

There are 2 separate programs. The public service one is way more open than people think. You qualify if you work for any government agency, non-profit, school, etc. 10 years working for one of those (at any salary) and you can get any remaining balance forgiven.

So, I could found a non-profit of some sort, the "Habitat for Halibut" perhaps, get tax exempt status (requires a wait of ~18 months to 2 years in some cases), run a trivial program of some kind, pay myself a dollar a year as the Executive Director, hold a few car washes to make enough dough to repay what we spent on the IRS filing fee, and after ten years of that kind of bullshit my student loans would go away?! Holy crap. Where do I sign up?

I'm not asking for myself: I have no student loans. But I run a sports non-profit, and would love to get some overeducated schmuck to do grunt work for me, and pay them pocket change so they can write off that debt. I'll call them the Executive Director and Vice President of Bugger-All. We need our Web site redone, everyone else is busy accomplishing stuff, and I don't feel like paying for talent. This could be brilliant.

The repayment plans are based off of your total income, so unless you are the ultimate mustachian, you are going to need more than $1 a year to live.

randymarsh

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.

There are 2 separate programs. The public service one is way more open than people think. You qualify if you work for any government agency, non-profit, school, etc. 10 years working for one of those (at any salary) and you can get any remaining balance forgiven.

So, I could found a non-profit of some sort, the "Habitat for Halibut" perhaps, get tax exempt status (requires a wait of ~18 months to 2 years in some cases), run a trivial program of some kind, pay myself a dollar a year as the Executive Director, hold a few car washes to make enough dough to repay what we spent on the IRS filing fee, and after ten years of that kind of bullshit my student loans would go away?! Holy crap. Where do I sign up?

I'm not asking for myself: I have no student loans. But I run a sports non-profit, and would love to get some overeducated schmuck to do grunt work for me, and pay them pocket change so they can write off that debt. I'll call them the Executive Director and Vice President of Bugger-All. We need our Web site redone, everyone else is busy accomplishing stuff, and I don't feel like paying for talent. This could be brilliant.

Is this Habitat for Halibut a 501(c)(3)? Then yes, anyone working for said organization qualifies.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service#receiving-forgiveness

As for paying yourself a dollar, that might cause an issue (unrelated to student loans). I know the IRS requires an S-corp owner to pay themselves a "reasonable" salary. They can't pay themselves $1 to save on payroll tax.

The other thing to know is that 120 payments at any qualifying employer erases the debt. That's 10 straight years at one place or 15 years across different employers, one that didn't qualify in-between. Once you make the 120th payment you're done. Apply and the remaining balance is gone.

TheGrimSqueaker

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I wonder if she has looked at the details of the Student Loan forgiveness details:

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher

Am I wrong - only certain schools in certain areas make one eligible for loan foregiveness?

I have heard people suggest that all public service employees are eligible and I don't think that is correct.

There are 2 separate programs. The public service one is way more open than people think. You qualify if you work for any government agency, non-profit, school, etc. 10 years working for one of those (at any salary) and you can get any remaining balance forgiven.

So, I could found a non-profit of some sort, the "Habitat for Halibut" perhaps, get tax exempt status (requires a wait of ~18 months to 2 years in some cases), run a trivial program of some kind, pay myself a dollar a year as the Executive Director, hold a few car washes to make enough dough to repay what we spent on the IRS filing fee, and after ten years of that kind of bullshit my student loans would go away?! Holy crap. Where do I sign up?

I'm not asking for myself: I have no student loans. But I run a sports non-profit, and would love to get some overeducated schmuck to do grunt work for me, and pay them pocket change so they can write off that debt. I'll call them the Executive Director and Vice President of Bugger-All. We need our Web site redone, everyone else is busy accomplishing stuff, and I don't feel like paying for talent. This could be brilliant.

Is this Habitat for Halibut a 501(c)(3)? Then yes, anyone working for said organization qualifies.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service#receiving-forgiveness

As for paying yourself a dollar, that might cause an issue (unrelated to student loans). I know the IRS requires an S-corp owner to pay themselves a "reasonable" salary. They can't pay themselves $1 to save on payroll tax.

The other thing to know is that 120 payments at any qualifying employer erases the debt. That's 10 straight years at one place or 15 years across different employers, one that didn't qualify in-between. Once you make the 120th payment you're done. Apply and the remaining balance is gone.

It says the person would have to be employed full-time, but I can't think of anything for them to do that would quite justify full-time effort or payment, unless they accepted one of those reduced executive-type salaries and got their income elsewhere. Making the loan payments would be up to them.

Not-for-profit companies don't have shareholders or owners like an S-corp, so there's no requirement to pass profits through to shareholders. They are governed by a Board of Directors (frequently unpaid) that appoint various executives, some of which might be paid or unpaid depending on the Bylaws of the organization. The Executive Director is one such position, generally paid, but there's no rule as to how much. It's not unusual for not-for-profit executives to be paid just $1 and do work on a volunteer basis, when those individuals receive income from another source such as a second job.

For the charity I already run, I wouldn't pay myself $1 because I already do the work for free: no need to buy the proverbial cow. Besides, I'm already a co-founder, the President, and the Chairbitch of the fucking Board (that last title isn't in our Bylaws but it sort of evolved). With that amount of power, money would be anticlimactic.