Author Topic: Case Study: ER for ...?  (Read 6527 times)

dippydoo

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Case Study: ER for ...?
« on: July 01, 2014, 09:28:18 PM »
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« Last Edit: January 10, 2018, 05:13:08 PM by dippydoo »

Snow White

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Re: Case Study: ER for low-income no frills family?
« Reply #1 on: July 02, 2014, 04:28:52 AM »
Can you and/or your husband increase your income by changing careers? That will give you the biggest opportunity for ER. Think outside the box for career options and don't feel limited by what you've always done. 

My first career out of college was in social services (BA in psychology) and I got so burned out that I was quite crispy around the edges and I didn't make a lot of money to boot.  Hubby said to me one day the simplest of statements..."why don't you do something else?"  It was like a light was turned on in a dark cave.  I literally had never considered changing fields.  After a bit of self analysis I went back to school and got a bachelors in nursing and got my registered nurse license.  It took less than two years since I already had a bachelors degree and I needed only the nursing courses and clinical rotations.   My income doubled almost immediately and only went up from there. It was the smartest career move I ever made and provided me with almost unlimited options for employment and an enjoyable career.

At some point you can only pinch pennies so far and you need more dollars coming in the door.  Good luck!

JGB

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Re: Case Study: ER for low-income no frills family?
« Reply #2 on: July 02, 2014, 09:47:37 AM »
Income
Me: 25k after taxes (I have two part-time jobs, recently left fulltime dead-end job in hopes of greener pastures and new job becoming fulltime).
Husband: 24k after taxes/healthcare deductions.  We each spent about $40,000 on state school B.A.ís. We work in insurance/marketing now.
______________
Total $49,000 per year

Current Expenses:
Rent/renterís insurance: $1060 per month (1 bedroom, least expensive place around)
Car Insurance including routine maintenance: $150 per month for both
Gas: $120 per month for both cars
Cable/internet $80 per month (my husband REFUSES to cut the cable because ďitís all I have left.Ē)
Clothing $100 per month   (still acquiring required business wardrobe)
Gifts etc: $80 per month for rest of yr (already committed to multiple wedding related expenditures)

*Note- One of my jobs/husbandís job is less than 3 miles from our apt, but itís impossible to bike/walk due to urban sprawl (highway) in PA.

This may sound a bit extreme (and I understand if the answer is "no" -- my wife and I abandoned a more financially beneficial area to move 2000 miles away because it was back home with our families), but... can you move? It shouldn't be too hard to replace two $25k salaries in most areas, and there are a lot of places where you can rent a 1-bedroom for half of what you're paying. If you choose the area right, this could lower your gas costs as well by enabling other forms of commuting and shorter distances for the longer commute.

Some further suggestions:
Re: Cable - exactly what is your husband watching with such dedication? Most shows are available on Hulu for free now, so he/you might be surprised how satisfied you can be with having just internet.
Re: Clothing - $100 per month is a lot IMO. Are you hitting thrift stores? You may well be able to buy an entire business wardrobe for the cost of what you're otherwise paying in 1-2 months of small purchases.
Re: Gifts - $80 per month for 6 months seems high. How many weddings are we talking about? This seems like something that could come down substantially without your recipients really even noticing.

dippydoo

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Re: Case Study: ER for low-income no frills family?
« Reply #3 on: July 02, 2014, 03:41:22 PM »
Your expenses seem pretty low.  Looks like you trimmed most of the fat out of the budget. Nice work.

I would recommend you run your income and expense numbers at the FI Laboratory.  You can run through different combinations of income and expenses, and see what works best for you.  This is also a great blog to read from start to finish.

http://www.madfientist.com/fi-laboratory/

Looks like you'll need to attack the variable interest loans first.  Is there a matching contribution for the 401(k)s?

Seems to me that you've got the cost part of the equation optimized; and now you have to optimize the income part of the equation.  I suspect that the marketing person would make more money in a sales position.


Thanks for the reply! I will check out that site now. Yes, there's  a matching 3% on husband's 401k. He's only contributing 12%.
I will investigate sales positions in my field.

matchewed

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Re: Case Study: ER for low-income no frills family?
« Reply #4 on: July 02, 2014, 03:53:51 PM »
Okies first of all you can get way cheaper on the phones.

But I have some good news. You're making (49,000/12=4083.34) 4k a month. With non-loan expenses of $1,960. You've got 2k a month to throw at loans. You'll be done with your student loans in about eight months. Then you've got to pay of the 27k. Another year or so. Let's round up and just call it two years to be debt free. You'll be 32. Now you'll have a 50% savings rate and a >$0 balance for your financial assets. At that rate it would take you an additional 16ish - 17ish years until FIRE. Source.

I have even more good news. You don't have to make all your life changing events that bring tears to our eyes right now (like getting rid of cable). These are things you can work towards. You can and will become more badass. Your income will raise, your savings rate will increase, and you will FIRE well before what I said you would do.

For tracking, I use excel. It's easy. But Mint does a net worth tracking too.

For spouses, I use involvement and goal setting. Ask for his financial goals, be patient, find common ground, is he even interested in FIREing?

4alpacas

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Re: Case Study: ER for low-income no frills family?
« Reply #5 on: July 03, 2014, 09:32:37 AM »
Can you and/or your husband increase your income by changing careers? That will give you the biggest opportunity for ER. Think outside the box for career options and don't feel limited by what you've always done. 

My first career out of college was in social services (BA in psychology) and I got so burned out that I was quite crispy around the edges and I didn't make a lot of money to boot.  Hubby said to me one day the simplest of statements..."why don't you do something else?"  It was like a light was turned on in a dark cave.  I literally had never considered changing fields.  After a bit of self analysis I went back to school and got a bachelors in nursing and got my registered nurse license.  It took less than two years since I already had a bachelors degree and I needed only the nursing courses and clinical rotations.   My income doubled almost immediately and only went up from there. It was the smartest career move I ever made and provided me with almost unlimited options for employment and an enjoyable career.

At some point you can only pinch pennies so far and you need more dollars coming in the door.  Good luck!


Thanks for the response. I am very interested in changing careers, however, I'm terrified of taking on more debt. My wakeup call was realizing I'd be 45 before paying off my student loans if I continued on my minimum payment path. I'd love to go into healthcare, but faint at even the thought of blood. Any solution for this? My husband is happy with his job overall. He receives 5 weeks paid vacation and likes the people at the office.

A change in career doesn't mean more debt.  Most careers don't require specialized education. 

Catbert

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Re: Case Study: ER for low-income no frills family?
« Reply #6 on: July 03, 2014, 01:52:31 PM »
Under ER expenses you mention costs for a chronic kidney condition; however, I don't see a line item in your current budget.  Do you have no co-pays or medication expenses at this time?  Is it all covered by the medical insurance cost? 

As others have mentioned you really aren't in bad shape budget-wise.  Just keep plugging away at those SLs.

CarDude

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Re: Case Study: ER for low-income no frills family?
« Reply #7 on: July 03, 2014, 06:27:30 PM »
Keep in mind that you don't have a *low* income; you're right about where the median household income is in the US. It's easy to get a skewed perspective here since the majority of regular posters make more. That said, it's definitely a good idea to look at both earning more and spending less.

Left

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Re: Case Study: ER for low-income no frills family?
« Reply #8 on: July 04, 2014, 02:55:42 AM »
Thanks for the response. I am very interested in changing careers, however, I'm terrified of taking on more debt. My wakeup call was realizing I'd be 45 before paying off my student loans if I continued on my minimum payment path. I'd love to go into healthcare, but faint at even the thought of blood. Any solution for this? My husband is happy with his job overall. He receives 5 weeks paid vacation and likes the people at the office.
I don't know if you've looked into laboratory jobs. The blood isn't too messy since it's already collected. I'm a med tech and since you have a degree already, med tech school here in KC is $3-4,000 for about a 14 month program. You could go the MLT route but I wouldn't reccommend it, go MT/MLS. But you could work as lab aids, specimen processor/accessioning (this is "office" work to me; ie: take calls, receive samples, deliver them). Or you could take a real office job at a lab. they require a degree but dont really care what subject. The pay for these is in the $12-16/hr range and MTs make double. There's usually positions since not many in public know about these jobs or think you need healthcare related degrees for them.

nereo

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Re: Case Study: ER for low-income no frills family?
« Reply #9 on: July 04, 2014, 07:32:26 AM »
Keep in mind that you don't have a *low* income; you're right about where the median household income is in the US. It's easy to get a skewed perspective here since the majority of regular posters make more. That said, it's definitely a good idea to look at both earning more and spending less.
Thanks, CarSafetyGuy, for pointing this out.  I think it's easy to loose perspective on what is "low-income".  $49k after taxes/healthcare costs puts one just above the median in one of the richest countries on earth at one of the most affluent times in recorded history.

Dippydoo:  You've taken some great first steps towards FI/RE.  There's some good news coming!  Like other posters said, finding higher-paying jobs will turbocharge your path to retirement, but I'm always hesitant to leave an almost perfect job (like your husband's). Also, you've trimmed most of the fat out of your budget nad it appears you've freed up a lot of cash which is currently all going towards SL reduction.  For the sake of simplicity, here's a scenerio I'd use given your current jobs and income.
(using your numbers given: Current expenses (outside SLs): $23,500/yr or $1960/mo), Income (after taxes/healthcare): $49k/yr or $4000/mo)
That gives you about $2000/mo (my calculations, your numbers) per month outside of your average expenses.

Continue to attack your SLs with interest rates - knocking of SL2 first and then SL1 (put everything but the minimum towards SL2 first, then SL1).  If you really can put $2000/mo towards your loans, you will have SL2 eliminated by November, and SL1 gone by March 2015.  Do a happy dance, light a copy of your last SL on fire, take a picture and upload it here.  Celebrate by going out to Chipotle*
The "family loan" of $27k is a bit trickier.  Economically, there is no reason you should ever pay it off faster than you need to, but there are family dynamics to consider, and many would say you should pay off family loans as soon as possible as a matter of principle.  I'll take the middle road and suggest that, in 2015 you increase monthly payments from $100 to $200/month.  Each year you can make it a goal of increasing those payments by $25 or $50/month until it's paid off, but economically there's no reason to pay more than agreed upon.

So - that means by early next year your SLs will be gone, and you'll have ~$1800/mo to invest (after increasing family loan payments).  Here's where the good news really kicks in.  If you can invest all of that $1800 (instead of spending it) - then in 19 years (when you turn 50) with an average return of 7% (inflation adjusted) you will have just over $900k.  Congratulations, that would give you a SWR of $36k forever.  Yippie! 

So:  as I see it your challenges are to contine walking this narrow line you've set up for you and your husband.  You can't give in to large consumeristic spending making $49k/year and still plan on retiring by 50.  There's also the question of how to get your husband on board, but hopefully once he sees progress and projections of how you can become millionaires he'll come around. 
On the positive side, none of this factors in promotions or windfalls.  If you can funnel all extra future money you can reach your goal even faster. You also have a solid emergency fund, which should help keep your repayment and investment strategies on track.

A few finishing notes:  You mentioned 401(k) balances - both of you should contribute at least as much to get the matching funds from your employers, even if this adds a couple of months to your repayment schedules.  It will lower your taxes and get you an 'instant return'.
In early 2015 funnel all money from not having SL1&2 into funding your 2014 IRAs.  Again these can reduce your tax burden and will be a core of your retirement portfolio. 

hope that helps!

* suggestions of celebrating at Chipotle (and nothing fancier) provided by MMM himself.
note:  Edited in a few spots because I'm lousy at correcting typos before hitting the "save" button.  Need to work on that.
« Last Edit: July 04, 2014, 07:51:08 AM by nereo »

dippydoo

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Re: Case Study: ER for low-income no frills family?
« Reply #10 on: July 04, 2014, 11:06:30 AM »
.
I don't know if you've looked into laboratory jobs. The blood isn't too messy since it's already collected. I'm a med tech and since you have a degree already, med tech school here in KC is $3-4,000 for about a 14 month program. You could go the MLT route but I wouldn't reccommend it, go MT/MLS. But you could work as lab aids, specimen processor/accessioning (this is "office" work to me; ie: take calls, receive samples, deliver them). Or you could take a real office job at a lab. they require a degree but dont really care what subject. The pay for these is in the $12-16/hr range and MTs make double. There's usually positions since not many in public know about these jobs or think you need healthcare related degrees for them.

Thanks, eyem. This may be the answer to doubling my income over the next 1--2 years. I'm sure transitioning to the field will be difficult, but I will look into it.

dippydoo

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Re: Case Study: ER for low-income no frills family?
« Reply #11 on: July 04, 2014, 11:24:20 AM »


Thanks, nereo. Your projections match mine.  Not giving in to consumerism will definitely be a challenge, as my husband is not happy with our current "bare bones" lifestyle. He thinks our expenses (taxes, water, general homeowner expenses) will greatly increase once we buy a home and throw off all of our calculations.

nereo

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Re: Case Study: ER for low-income no frills family?
« Reply #12 on: July 04, 2014, 12:25:48 PM »
  Not giving in to consumerism will definitely be a challenge, as my husband is not happy with our current "bare bones" lifestyle. He thinks our expenses (taxes, water, general homeowner expenses) will greatly increase once we buy a home and throw off all of our calculations.

I see getting your husband on board and continuing your mustachian ways as being your two biggest challenges.  Hopefully your husbands attitudes will slowly come around once he see debt eliminated and the annual increase in your savings accounts.  Keep working on it.  Thankfully, the longer you follow the mustachian-lifestyle, the easier it becomes, and often the healthier you are for it.

Regarding your husband's belief that expenses will greatly increase once you buy a house... that argument doesn't make very much sense to me.  As renters, you are already paying for the taxes and homeowners expenses - it's just part of your rent.  Otherwise, your landlord would be loosing money and while possible that isn't likely. In fact, your landlord is most likely making money off your rent, even after paying for taxes, fees and expenses.  That's why so many here are landlords.
Of course there is no reason you have to buy at all, and strong cases can be made that in many markets you are better off renting and investing everything you can in an index fund.  Check out many of the "rent vs. buy" threads on this blog.