Author Topic: Case Study: Almost-Newlyweds Looking for Critique  (Read 2855 times)

lemondirgopie

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Case Study: Almost-Newlyweds Looking for Critique
« on: March 05, 2014, 12:39:03 PM »
With our wedding coming up in about two weeks and the job I just started last month, I've been thinking more about money and our budget. Since August we've been surviving on my fiance's elementary school teacher salary (in NC, so really not that much) and with my new job as a barista/server we can finally work on saving, paying down debt, and spending on the occasional brewing/soapmaking supplies (some of our hobbies).

Some more info: I'm 26, he's 27, we use YNAB, I like the All Your Worth method of spending categories as a general guideline (50% Needs, 30% Wants, 20% Savings) with the goal of increasing savings, I'm going to be starting school in the Fall for a degree in Massage Therapy, and we moved to a small and not very Mustachian town in NC last year to start his career as a school teacher (through NC Teachers Corps, which is sadly loosing it's funding).


Reader Case Study - Almost-Newlyweds Looking for Critique

Income:
Him: $2590/month
Her: ~$600/month (unsure about this, as I've only started working there and tips vary, but that's my unfortunate estimate)
Subtotal: $3190

Current expenses:
Rent: $640 (this will go down once we pay off the horrible pet fee)
Groceries: between $300-400
Utilities: ~$90-100 (we keep the thermostat low and conserve where we can, but we seem to only be able to get this so low)
Gas: $60-110 (varies because we occasionally need to make long trips for his work. He carpools with a co-worker and I walk/bike to work)
Cats Food & Litter for 3 cats: $60
Etsy Expenses: ~$20 (I sell soaps/body care products on Etsy and want to increase this category to further invest in it: https://www.etsy.com/shop/oneeyedbuddhacat)
School Expenses: ~$50 (varies, as he sometimes has to buy books/supplies for his classroom, and also includes a membership to NCAE)
Health Insurance: $17 (thank you Obamacare!)
Dental Payments: ~$50 (varies, as we are slowly getting his teeth back in good shape after years of candy and not brushing, habits he has since given up. He is also getting Flex money in April to go towards this.)
Car Insurance: $72
Scooter Insurance: $22
Car Payment: $110
Scooter Payment: $138
Various spending: $300 (household goods, homebrewing supplies, entertainment, restaurants, etc.)
Subtotal: $2000

Debts:
Her Student Loans: $18000 (with my unemployment, this has been in deferment and ends in May. I hope to start paying it off again before then but I want to get a hold of how much I'm actually making before I do. It will be a little over $220/month) @ ~6%
His Student Loans: $52900 (Very big and very scary. We are hoping that after five years we can get a portion of this forgiven. Currently in deferment/income-based repayment) @ ~6%
Scooter Loan: $1590 (2010 Genuine Stella - used to be a main form of transportation but has only be used occasionally since we got the car) @ 4.9%
Car Loan: $3031 (2007 Scion xD, manual, awesome little car) @ 4.25%

Savings:
His Summer Savings: $2800 (Since he doesn't work in the summer, we opted for 10-month pay and have been putting away money each month in a savings account to earn interest, as opposed to having it spaced out over 12 months).
Massage School: $20 (You have to start somewhere...)
Her Emergency Savings: $360
Friend's Wedding Expenses: $250 (transportation, suit rental, etc)


So there it is. Anything that jumps out at anyone? What should we attack first? Focus on increasing savings or attack our looming debt? I realize that the best thing we could probably do is increase our income, and me having a job has definitely helped in that arena. I would like to start making an income (rather than breaking even) with my Etsy shop and have plans to allocate a certain amount each month to supplies to increase my inventory. We really want to be in good financial shape, and have struggled for years to get our footing after we both graduated. Help is greatly appreciated!
« Last Edit: March 05, 2014, 05:03:28 PM by lemondirgopie »

warfreak2

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #1 on: March 05, 2014, 12:48:06 PM »
You need to post the APRs on the debts.

4alpacas

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #2 on: March 05, 2014, 12:49:23 PM »
What are the interest rates on your loans?

I would recommend selling the scooter if you're not using it. 

How much will massage therapy school cost?  Do you think it will be worth it financially?  Right now, you have $68k in student loans.  I would really think hard about getting your massage therapy license.  I have a few friends that practice, but they don't make very much. 

nereo

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #3 on: March 05, 2014, 12:53:12 PM »
Welcome!

As warfreak2 mentioned, we need APRs on the debt.
Otherwise, most things look ok.  I'm not sure about the scooter (is it important if it's not being used?  Could be sold and debt eliminated?)

Also, one problem I have with the "50% Needs, 30% Wants, 20% Savings" philosophy; it needlessly ties your budget to how much you make.  Suppose you got a new job that doubled your income... your "needs" shouldn't increase by the same amount (or really at all, except perhaps additional commuting costs). My strategy is to make your monthly expenses as low as you can comfortably make them, and then try to never increase them.  Put all future increases in income towards either savings or debt reduction.   No need to ever limit yourself to 20% savings if you have a major goal of FI.

MissStache

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #4 on: March 05, 2014, 01:20:25 PM »
Your grocery spending is pretty high for two people.  You could get that down to $250/month with a little effort and perhaps even lower. 

Are you bringing in any money from your Etsy shop?

Congrats on your upcoming wedding!

jezter6

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #5 on: March 05, 2014, 01:38:30 PM »
You list his student loans in debt, but not a payment? Is that in deferral somehow as well?

Based on your spending, you need $2220/mo over the summer. Assuming 3 months (June-Aug), you need $6660 to survive the summer.

Assuming you make $600/mo during that time, you really need about $4860.

You have $2800 saved, so you need about $2060 in additional savings, or at least $687/mo in savings from March through May to cover that shortfall. Or hope for more work.

Based on $2000 in current expense and $3190 in income, you should be able to cover that between March and April. You need to cover that as minimum to keep you above water. And that is assuming that nothing happens in your job with reduced hours.

I would stockpile everything you possibly can and then try to reduce expenses over the summer as much as possible.

The scooter should go. If it's not being used, it costs more than $150/mo  just to sit around and make payments and insurance on it. With your planned shortfall over summer, anything you can do to cut expenses should be done. That includes eating out and probably greatly reduced entertainment and "fun" expenses until you're sure you have enough to survive the summer.

After that, I think you really need to think long and hard about schooling. how are you paying for it? You don't have time to save up between now and fall. Are you going to take out even more loans?? Bad overall idea when you have $18k of student loans already and are not really using the education you purchased.


Thegoblinchief

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #6 on: March 05, 2014, 02:27:15 PM »
Groceries are quite high, and the miscellaneous category is out of control. Goal for groceries should be $200-$250 including household items and alcohol if you drink. For "miscellaneous" I'd limit that to $50 for dining out.

Without the APRs on the debt, it's hard to give advice, but the cutoff is (roughly) 4%. Above that, kill it off ASAP, highest rate first. Below that, pay off at the normal amortization and fund 403b and Roth IRAs, house down payment if desired.

Debt aside, if you hit the spending changes I list, you'd already be at a 50% savings rate. Be careful how much money you "invest" to raise your income.

lemondirgopie

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Re: Case Study: Almost-Newlyweds Looking for Critique
« Reply #7 on: March 06, 2014, 05:40:00 PM »
How much will massage therapy school cost?  Do you think it will be worth it financially?  Right now, you have $68k in student loans.  I would really think hard about getting your massage therapy license.  I have a few friends that practice, but they don't make very much.

It's through the local community college and is very inexpensive (especially compared to private schools), maybe $4000 after grants/aid. I have some friends practicing massage therapy and am well aware that it is not the biggest money maker! I've given this lots of thought (never been one to jump into decisions), and my bachelor's degree has yet to land me much pay back. Massage therapy fits a lot of my interests, allows for flexibility (haha!), and can integrate my body care products. Plus I would like to go further with it and get certified as a Restorative Exercise Specialist. Despite it not being a big financial move, I'm really excited about it.

You list his student loans in debt, but not a payment? Is that in deferral somehow as well?

Based on your spending, you need $2220/mo over the summer. Assuming 3 months (June-Aug), you need $6660 to survive the summer.

Assuming you make $600/mo during that time, you really need about $4860.

You have $2800 saved, so you need about $2060 in additional savings, or at least $687/mo in savings from March through May to cover that shortfall. Or hope for more work.

Based on $2000 in current expense and $3190 in income, you should be able to cover that between March and April. You need to cover that as minimum to keep you above water. And that is assuming that nothing happens in your job with reduced hours.

He is in the "income-based" repayment plan, which has him not paying anything at the moment, unfortunately.
Also, the summer only counts as two months, so we're a lot closer to our Minimum Summer Savings Goal (about $400?) than that.

Your grocery spending is pretty high for two people.  You could get that down to $250/month with a little effort and perhaps even lower. 

Are you bringing in any money from your Etsy shop?

Congrats on your upcoming wedding!

So, we've tried hard to get this down, and shop for most of our items at Aldi's, with a few things that aren't available there/are low quality, elsewhere. We cook pretty much everything from scratch and don't eat a lot of processed foods (lots of beans/rice, soups, eggs, sometimes fish), so I'm a little lost as to how to lower our grocery costs even more. When we first moved here I think I remember looking at a comparative Cost of Living calculator that the city has on their website and food costs were considerably higher than where we moved from, so maybe that's it?

As far as Etsy, yes I am bringing in money, more so lately, but not so much that I can call it a reliable income. I want to invest more into this as I'm very passionate about it (I've attended free business workshops at the local community college to learn more) and would love to devote more time to it.

And thanks! :)


Oh, and I know everyone is recommending selling the scooter, and I will definitely bring up the idea with my fiance. At this point I think it's more of an emotional attachment (was one of our first vehicles we purchased, and it's darn cute) but would be a very smart move to sell it. Thanks everyone!