Case Study - 75% Income Reduction to Follow Dream

[Angie_Short_Stash]

I started reading MMM's blog about 2.5 years ago and I have slowly made my way through nearly the whole thing. My dilemma is that now no other financial advice I find quite matches up, so I'm turning to you guys for help. Previously I (21) made 1770 a month after everything, and my bf (22) made around 3400, working 55+ hour work weeks. We recently decided that my bf was going to quit his job and work on writing a book and working on his YouTube channel which are his big passions.The big push for this decision was the fact that everyday was a fight for him to go to work at a place he didn't like for 10-14 hours a day. The schedule was creating a terrible work life balance and causing a strain on our relationship. I just started my job about 6 months ago in my chosen field. I love the work, and I plan to be there for a couple years. I have done the math multiple times, and we can make the 75% income cut but it'll be tight.

Income
$32,000 salary
12% 401k + 4% match
Monthly after tax income - $1770

Expenses
$595 - rent and utilities (on a month to month basis, will be 650 if we have to sign a new lease)
$40 - electricity on average
$92 - internet :'( (we hate Comcast and want to leave, but don't know another reliable service)
$100 - car insurance (paid in chunks every 6 months)
$100 - car payment
$300 - Groceries on average
$80- gas on average ( my commute is an hour each way)
All Expenses - $1307
$463 surplus.

Extras
$100 - insurance
$120 - phone (soon to be $60)
Both of these will come out of his savings to make things easier for me

Assets
$5000 - my savings
$6000 - his savings
Around $2000 in old 401k plans
04 VW Jetta ($1,280 loan, would like to pay off soon)
04 Toyota Solora (paid off)


I know that this path is going to improve the quality of our lives, but I also understand that it could take a while for his passions to start creating income. My big questions are these:

-How long can we reasonably sustain this plan at our current income?

-Is it worth it to move to a place $250+ more for rent to cut out my commute?

-Bf's car has a very worn transmission. My car always seems to have one problem or another. We've discussed selling one car, but he is resistant to it. Would it be better to sell both and get one car that is possibly more reliable?

-What ways could his writing and filming skills make us a little extra money before his career takes off?

-Is it too soon to ask for a raise at my work. If not how do I do it, and how much should I ask for? (1st big job in my career)

I love the Mustachian community, and we would really appreciate any advice on this. It'd also be great to hear from anyone who has done this before. Thank you guys!

[renata ricotta]

-How long can we reasonably sustain this plan at our current income?

-Is it worth it to move to a place $250+ more for rent to cut out my commute?

-Bf's car has a very worn transmission. My car always seems to have one problem or another. We've discussed selling one car, but he is resistant to it. Would it be better to sell both and get one car that is possibly more reliable?

-What ways could his writing and filming skills make us a little extra money before his career takes off?

-Is it too soon to ask for a raise at my work. If not how do I do it, and how much should I ask for? (1st big job in my career)

- Sustainability: This depends entirely on your and your boyfriend's temperament and patience. You are living below your means and can save a couple hundred dollars a month (if you truly have zero extras - that might get wiped out often with little purchases that add up). Theoretically, you could keep doing that forever, but you'd also have to work almost forever, too.

I think I'd be willing to do something like this for a significant other I really loved for about a year, MAYBE two if I really truly believed he would ultimately be successful with is dream. (I'd do the shorter time period if I wasn't really sure it would work out but I wanted to be supportive). Additionally, I wouldn't be comfortable doing it for anything less than a Life Partner - spouse, fiance, etc. Your relationship may vary.

- Move: I know everybody here loves the live-close-to-work mentality (for me, it's practically a requirement, and I've been known to pay 2x the rent for a walkable commute). But numbers-wise, in your scenario, I'm not seeing how that helps you out. Unless you could go down to zero cars in a closer apartment, so you don't have a car payment, car insurance OR gas ($280), you're not saving enough on your commute to make it worth it, IMO. (Plus, remember moving itself can be expensive. Security deposits, rental application fees, unpredictable new utility costs, etc.).

- Extra money: I'm not sure how to make extra money at attempting to be a YouTube sensation, but I kind of doubt that this new adventure will take up 100% of his time. Could he get a part-time (maybe very part-time) job in the weekends/evenings to help relieve things a bit? Even a minimum wage job, like delivering pizzas, would really relieve the pressure on your tight budget. If he's not even willing to consider such a thing, I would see it as a relationship red flag.

- Car: is he going to be working on his new career from home for the foreseeable future? Are you in a somewhat dense community, where he can walk or a ride a bike during the day if he needs to go to the grocery store or something? If so, I'd say yes, go down to one car. I wouldn't get a newer one if the ones you have now are reliable enough to get by. I'd keep the one with lower maintenance costs or better fuel milage.

- Raise: as a general rule of thumb, 6 months is too early. One year is much more likely to go over well. As a general plug, I LOVE the askamanager blog for all these workplace questions. She has tons of posts about how to best ask for a raise, and when. The blog in general is a godsend for people starting out in their careers. Start with this post and accompanying article: http://www.askamanager.org/2015/01/want-a-raise-heres-how-to-get-one.html.

Good luck!

[mandy_2002]

From the cost of insurance and the age of your cars, it appears as if you have full coverage on 11 year olld cars. The one with the loan probably requires it, but the other does not. Is there a reason that you keep full coverage? Or do you actually only have liability and it's just THAT expensive? (According to KBB, it would cost about $4,000 to replace either of these cars. If your deductible is $500, you're paying an awful lot for $3,500 worth of coverage.)

[iamlindoro]

While I am one to encourage following of dreams, I think you are both underprepared to do so now.  I've been in your boyfriend's position of having the life sucked out of me by a job, so I sympathize... but it would probably help to spend a few more months preparing.  Here's what I'd do:

For the next 2-3 months, live off of this proposed budget while he continues to go to work, and see how it actually works in practice.  Your boyfriend should put every penny he makes first into paying off the auto loan, then into savings (IMO, split between yours and his).  Once the auto loan is paid off, reduce the insurance coverage to liability only on both vehicles.  You should be able to spend ~$150 or less every six months per vehicle, cutting those costs in half.

Now, as to the costs:

$92 for Comcast - This is too much if for internet only.  Reduce to a lower tier/lower speed.  They may not advertise it, but it's available.  Cut back to 10 Mbit or less of service, which is still adequate for fast downloads and streaming HD content.  You should be able to cut between 30-60 off of this bill.  I suspect you are also paying for some basic level of cable service at this price.  Don't do that, you can't afford it.

$120 for phones - You already know this is a problem.  Switch to an MVNO before embarking on this experiment.

Making these changes should increase your monthly surplus by over $200, which gives you a little more breathing room.  It should also allow your boyfriend to increase his savings by thousands.

The above discussion aside, you are in a non-binding relationship.  Consider carefully whether you want to be subsidizing his lifestyle without some sort of legal relationship between you two like a marriage.  What will your boyfriend be bringing to your relationship in return for having his entire lifestyle more or less for free of charge?  Have you guys discussed the logistics and expectations of this arrangement?  Will he be taking over all domestic tasks?  When and if his pursuits start earning money, what portion of it will be paid back to you?  At what point will he begin to cover bills again?  There is a real opportunity for mismatched expectations to harm your relationship and cause resentment.  Tread carefully.

[Angie_Short_Stash]

To cover one concern we have been dating for over 5 years and are waiting to get married until we are no longer covered by our parents health insurance to save some money. I say boyfriend but we have made a life time commitment to each other and consider ourselves married (just without the license).

For Comcast it is just for internet with no kind of cable package at all which I don't understand. We will call them next week to try lowering it.  I think cutting the internet bill would help a lot, but is 10 Mbit enough for uploading a lot of videos? Also CenturyLink seems to have a lot lower rates, do you guys know if they have reliable service?

The car insurance is also through our parents, so I don't know a lot about it. I will talk with them this week and see if we could drop some unnecessary coverage or get our own plan together that's cheaper. We'll discuss more which car to get rid of cause I agree that getting rid of one would be best.

I think I was kind of hoping someone would come up with magic numbers to make moving make sense, but I know it doesn't work that way. I will continue listening to audiobooks for the long trek.

We've discussed it a lot and he has agreed to take over most of the house duties along with getting dinner prepped for me when I get home (I love cooking to help me unwind from my day.) We have also decided to give it about 6 months with him working full time on videos and writing, then he will get a part time job to help cover the costs.

Thank you guys for the different perspectives! You have given us some good things to think about and figure out. I think this will help make it easier for us to go forward.

[Angie_Short_Stash]

Also thank you for the askamanager blog, that's going to make my work life easier!

[Villanelle]

I would feel a very strong need to set up wickets and deadlines for this venture of SO's.  He needs to find a way to bring in at least $x per month in 6 months, and $y per month in a year, or else the plan would be scrapped and he'd need to again pursue full time employment.

I wouldn't have been comfortable doing this at all unless he had already started the YouTube Stuff and had a specific plan.

For his writing and filming skills, there are lots of websites that offer pay by job work in these kinds of fields.  Approaches vary, but he can sign up at several.  At this point, I think it would be necessary for him to take pretty much any and every job he is able to get.  Often for those without experience, pay is low initially, but the jobs serve to  build experience and thus get more per job (and more jobs) in the future.  Tutoring kids in English (high school or college)?

Can he get a part time job, perhaps at a place where you guys shop so his discount can work toward reducing your costs?  Even a couple days a week, perhaps with the agreement that when he reaches a certain level of YouTube income, he can quit?  Or substitute teaching, if he qualifies, which is easy to scale and has a very flexible schedule?

[Neustache]

If you can go down to one car without payments or carless, moving, I think it makes sense to pay higher rent for that. 

Also, 2 hour total commute!?!  Move.  If you really need to make up the rent money, he needs a part-time job or heck, you could do something part-time with the 10 extra hours you will be gaining from the move.  Blech.  Moving is expensive, I guess, but so are car repairs.

[iamlindoro]

For Comcast it is just for internet with no kind of cable package at all which I don't understand. We will call them next week to try lowering it.  I think cutting the internet bill would help a lot, but is 10 Mbit enough for uploading a lot of videos? Also CenturyLink seems to have a lot lower rates, do you guys know if they have reliable service?

http://www.cabletv.com/xfinity/internet

Comcast's nationwide "Performance" Tier pricing is $39.99 for the first 12 months, then from $56.95-$64.95.  You are either paying for some additional service or you are on a ultra-high-bandwidth tier.  Yes, 10 MBit is enough to upload videos, because a) You can start an upload and walk away, being patient, and b) compressed HD video tends to be from 3-7 Mbit/second and could thus be uploaded in real time.  Change is hard, but you should be willing to accept limitations on luxuries if you're really trying to put an effort into making a new venture work.  You could also threaten to cancel and see if they'll extend you another year of the promotional pricing.

Anyway, yes, Centurylink would be fine, too.

The car insurance is also through our parents, so I don't know a lot about it. I will talk with them this week and see if we could drop some unnecessary coverage or get our own plan together that's cheaper. We'll discuss more which car to get rid of cause I agree that getting rid of one would be best.

This would be a good time to become very familiar with all aspects of your financial life.  You should not be paying any bills on autopilot, they should all be up for discussion and consideration.  Get onto your own insurance plan, comparison shop, and get the minimum required coverage, *especially* since the vehicles are all over ten years old and have lost most of their value to depreciation already.  Dumping one car would be a great decision, too.

Though there are tricks and hacks that allow one to live a luxurious lifestyle and still save large amounts of money, most of the savings we discuss here is based on realizing that most of the luxuries we pay for do not improve our lives in a way which justifies the cost, and cutting the fat.  There is an awful lot of fat in your budget, but it's up to you to be willing to step up and make changes which will feel scary at first.

[Dee18]

I think he should consider working a bit...barista?  Waiter?  Anything?  There are a lot of hours in the week and at 22 he should have plenty of energy.

[Neustache]

I think he should consider working a bit...barista?  Waiter?  Anything?  There are a lot of hours in the week and at 22 he should have plenty of energy.

I agree.  Seriously.  If it's his passion he's doing it in his off time anyways.  He should work 20 hours a week, in my view.

[RosieTR]

Trying to guess why you are tied to your locality if you're an hour away from your job and going to be the only one having to show up for a regular job each day. If your job is in Boulder, I can see that, because few places are reasonable enough not to have a clown car commute into Boulder, esp at 32K/year. In that case, consider dropping a car and seeing what a bus or VanGo situation would cost in terms of money and time. If BF was willing, you could do a part-time drive/part-time bus so he had the car some days and you did others. Then just plan around that. You might think about seeing if work has any incentives for alternative transportation, as well. It won't be a raise but it may help offset transportation even further (discounted bus pass, for example).

Another option is to find another person or couple who would be willing to have you as roommates. Housing costs go down quickly when more people share a space, and you often get way better amenities (like, decent sized kitchen and garage). Not sure the laws in the various suburbs and such; some cities have a 3 unrelated adult rule, so that 4 unrelated adults cannot live in the same home. That said, there may be difficult to find but out there opportunities for renting a place with one or two other people-think of someone elderly or a divorcee who wants to stay in a house but can't quite make the bills/maintenance. Having a young couple around might be beneficial for all. I have no idea if services exist to link people together in this type of situation, beyond something like Craigslist.

No matter what your decision, having a plan in place with BF as to financial expectations is key. Even if you were married, this is essential with couples. The fact that you aren't means it's even more important, and for both of you.