Author Topic: Case Study: How are we doing? How can we do better? When/Where/How-House buying  (Read 5519 times)

SillySarah

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SillySarah Case Study: I am 27, husband is 28, no kids. This is my first MMM forum post, but I have read the blogs occasionally. Up to this point we have been following Dave Ramsey's baby steps, but now feel like we are "sluggish" and want to be saving/investing more, but also want to buy a house. So many directions to take, and it never feels like we are making much traction or getting anywhere. Part of this is job situation. I only have a temporary job, and drive an hour to work 1 way, husband has an okay job, and drives about 15 minutes. I am constantly looking for permanent work, but have yet to find anything, and I am still holding out to "work in my field" which is a wildlife biologist...but anyway...

Income: Pretty stable at this moment, husband $40000 gross, me $30000 gross.

Current expenses: We have been doing a detailed budget for almost 2 years now, here is copy of this months

Sarah Pay Check   $850.00   
Sarah Pay Check 2   $850.00   
      
Hubs Pay Check 1   $1,091.00   
Hubs Pay Check 2   $1,091.00   
Total Income           $3,882.00   
   
      
Rent      $800.00
Phone   $85.55
Cable   $63.14   
Groceries   $450.00 (this probably seems high, but we support our local co-op and eat mostly organic, and if we have to give up other things to eat like this, we certainly would-we eat at Chipotle every Friday, but that is the extent our our eating out).
Entertainment   $70.00
Travel   $200.00   (Friends and Family all live far away, this is not an "every month" expense, but it is sometimes).    
Matt fun    $20.00
Sarah fun $20.00
Gas          $400.00   
Spending Money  $150.00      
Retirement   $100.00   
Total: $2358.69

The remainder we put in a savings account towards "house fund."-this month about $1500

Assets: In our savings account, we currently have $23000, which includes about half as "emergency" fund. The other half can be considered "house fund" and some other sinking funds (like car insurance, car repairs, etc.)

My husband puts 3% into his 401K at work (and is matched 3%), and we both have about $2500 in Roth IRAs, but haven't been adding to them lately (cause we are only on 3B of the Dave Ramsey plan), but I have been trying to do $100 a month into mine. I drive a 2005 Subaru Outback and my husband a '96 of the same. I keep hoping I will get a job a closer to home, making the fuel efficiency thing not a big deal, but I did just buy this car 6 months ago, and increased my fuel economy significantly from my '96 Subaru legacy.

Including the cars and retirement accounts I guess our total assets would be about $34000, if that is how that works...

Liabilities: None, but we have only been out of student loan debt for 2 years.

Specific Question(s): Why do I still feel like me are making no traction? Our next goal is to buy a house, but I'm not sure when would be a good time to do that, given our  (my) job situation. Also, the houses where we live are quite expense, 20% for a small "fixer-upper" in town is about $30000 and we'd like to move back to PA (we live near the border with MD) because the schools are better, but property taxes are about $5000 a year or more. I also have really big house dreams (like reasonable house, lots of land, self sustaining farm, kind of thing). But clearly that isn't going to happen in our area, with our income, anytime soon. We also want kids in the near future, but we have a tiny one bedroom apartment. Should we continue renting (but move?) to have kids and keep saving for our dream home? Buy something smaller/in a bad school district/with no land sooner rather than later to get some equity now (or soon-sh)? Not do anything until the job situation is figured out? How long is too long to wait?

I hope this makes sense. I'll be around to answer any questions. Hope this is in line with general MMM forum topics!

Thanks




waltworks

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You're going to get some normal/standard advice here:
-Cut the cable/find cheap ISP of some kind and watch netflix if you insist on TV.
-Get cheaper phone plans. FreedomPop/Ting/Republic, etc.
-Decide on a total entertainment/spending money/fun budget and stick to it. It should probably be a lot less.
-Drive a lot less. $400 worth of gas a month is just insane. If you can get rid of a car, do it. If you are making $30k and driving a long distance to work... you are barely making any money once your commuting time/costs are factored in. Can you telecommute some of the time? Find a job closer to your place? Start a side gig and try to grow it into a new home business?
-Max Roth IRAs each year for each of you. This can double as a house fund since the contributions can be withdrawn without penalty whenever you want.
-Make more money.

At your income level, if you want to buy a $300k house anytime soon, you are going to have to take saving your money a lot more seriously. And with rent at $800 a month, buying a house is probably a dumb move for the time being anyway.

-W

Retired To Win

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Sarah,

You've laid out in your original post quite a few "big deal" financial and life goals.  Not a single one comes cheap.  And if I were in your shoes, and was trying to make provision for all of them at once, I too would feel that I was not making much traction.

So... sit down with pencil and paper (pencil, because you're certain to be erasing and rewriting) and write down all of those goals of yours.  Now -- together with your partner -- number them in order of priority.

Then do what any good general would do.  Concentrate all your forces and hit your primary goal with everything you've got.  Then, once you've achieved that goal, aim for the second one on the list and repeat.  I do believe you are going to see yourself getting traction that way.

Good luck.

SillySarah

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You're going to get some normal/standard advice here:
-Cut the cable/find cheap ISP of some kind and watch netflix if you insist on TV.
-Get cheaper phone plans. FreedomPop/Ting/Republic, etc.
-Decide on a total entertainment/spending money/fun budget and stick to it. It should probably be a lot less.
-Drive a lot less. $400 worth of gas a month is just insane. If you can get rid of a car, do it. If you are making $30k and driving a long distance to work... you are barely making any money once your commuting time/costs are factored in. Can you telecommute some of the time? Find a job closer to your place? Start a side gig and try to grow it into a new home business?
-Max Roth IRAs each year for each of you. This can double as a house fund since the contributions can be withdrawn without penalty whenever you want.
-Make more money.

At your income level, if you want to buy a $300k house anytime soon, you are going to have to take saving your money a lot more seriously. And with rent at $800 a month, buying a house is probably a dumb move for the time being anyway.

-W

Thanks for the insight. Yes, I agree, cable(internet)/phone need to go down, husband does not currently.

The "spending money" is not "fun"-this is like toilet paper and stuff...

As I said, I am working my butt off to find another job (two interviews this month), but it is not easy. Do I give up the job I want in order to make more money? For a while I've thought I wasn't "there" yet, but as the clock ticks, I feel the money pressure more and more. I'm sure I could get an environmental consulting job and make at least $10,000 more a year, but I feel like that is giving in and working for "the man." I'm a non-profit kind of girl...

Can you provide a link or something to more info about pulling money out of Roths? I always thought there was taxes and penalties if you pulled it out early.

Thanks

wrkirk

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My personal opinion having followed a similar path: screw trying to work in what you "really want to do". You'll miss out on a lot of earning and saving potential. Work for money early in life, save as much as possible, and take advantage of compound growth. Once you are FI, then do those things you really want to do, either for free or little money because you can. I tried doing the things I really enjoyed but didnt make any money. Then had kids and tried to scrape by. After a couple years I said screw it and got a job that paid me what I'm worth so I can provide for my family and save for FI. I only wish I had woken up sooner.

waltworks

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I think most people would consider TP part of the grocery budget, not "spending money", but if that category is really just mandatory non-food expenses, then don't worry about it.

If you are spending $400/mo on gas (~160 gallons assuming $2.50 a gallon), and have cars that get ~25mpg, you have to be driving somewhere around _4000_ miles a month. That is your biggest problem, really. If you use the blunt-instrument IRS rate of 50 cents a mile, your cars (gas/oil, tires, maintenance, insurance, taxes/registration, etc) and commuting are costing you $2000 a month - quite literally one third of your GROSS pay as a couple!

It's not actually that bad, probably, but it's very, very bad. Cars are killing you.

Non profits are great. But you are essentially working for free. You would almost literally be better off flipping burgers at some joint down the block. I'm not trying to be a jerk, but if your job is something you love and believe in - then you need to decide if it's something you want to mortgage your financial future for.

-W

waltworks

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Spruit

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Hi Sarah, just a quick hello from a fellow biologist. Your struggles are a lot like mine, although we live at the other side of the pond. Although I must say you are still able to save a lot more than I do now (we both work parttime in education, not the best paying field).

You say your husband has a 15 min. drive. In my experience that means a 35-45 minute bike commute. I can tell you that's very doable! I ride my bike to work 4-5 times a week, we are a one car household. That could save you a pretty penny. And spring and summer are excellent times to start the habit.

RexualChocolate

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I'd really evaluate if buying a $150k house makes financial sense with rent at only $800/month. A $300k house certainly does not with property taxes alone over half of that.

Your commute is an issue but that may be unavoidable due to the nature of your work.

I do not recommend biking like many on this forum do- the South(and especially suburbia) is not used to having bikers on the road. They barely understand pedestrians at crosswalks when they're in the city. There are other things that you can do that would save you more. Your food bill is very high.

As for bigger picture, the lowest hanging fruit here seems to be on the income side of things. Both of you make reasonable salaries, but there is definitely a lot of upward potential. I'd look into switching careers for both of you. It sounds like you are in a rural area, so this may include a move. However, you have to weigh that against doing what you love which is a personal decision.

gecko10x

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I think you should break-out how much your sinking funds really are, because right now you don't have a very clear picture. Information is power, and you appear to be missing a lot of information. Could be partly why you aren't making the traction you think you should.
If you have 2 years' of budgeting history, you should be able to do this fairly easily. Break out ALL expenses that aren't included in your other categories.

Travis

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Sarah, to be frank your personal convictions appear to be clashing with your financial and future living goals.  I understand the desire to work how you want, buy local and organic, and not work for "the man," but if you want to achieve your financial goals you're going to have to be flexible on some of these things.  That lack of traction you're feeling has a lot to do with your competing goals and spending too much on the inefficient life you're currently living.

-You want to buy a house, but purchasing in your area would require paying over double your current rent. 
-You want children, but it would require a larger place to live and probably reduced working hours.
-On the low end you're spending the equivalent of an entire minimum wage salary just driving to work every day.
-Your Co-Op organic food budget is equivalent to a family of four buying at a supermarket.
-You're spending the equivalent of your "retirement" category on fast food every month.
-cell phone and cable/internet can be easily reduced with cheaper carriers/plans.

If you're looking more money to put towards your financial goals, there they are.

As most of the advice on here has said, you need to think hard about what your priorities are.  You're either going to continue working doing what you love but making little (and paying for the privilege of driving there every day), save aggresively for FI, or save for a house (somewhere you can afford!) and have children. 
« Last Edit: March 09, 2015, 09:29:42 AM by Travis »

ShoulderThingThatGoesUp

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You can make a difference in the private sector. The biologists that work with me actually do help conserve wildlife by showing our clients where they can't build.

That said, when people with your attitude come in to interview they don't get hired. Nobody wants to work with somebody who hates the organization they're working for. But it's time to move beyond this college "corporations are the problem, man..."  - especially if you want to invest in corporations to reach FI!

tlars699

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You want sustainable farming eventually? Why not shoot for that?
Buy a parcel of un furbished farmland for 5-10 acres and "invest" in it, eventually building a house on it. Then you have the perfect place to raise your kids.

Bracken_Joy

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SillySarah

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Thanks everyone for the input...it was kind of all over the place...yet kind of not.

I do not  yet have a clear path, but I do certainly have a lot more to think about.

And whoever said Chiptole equals my retirement budget doesn't know how cheap Chipotle is...but I get your point...

justajane

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Your gas and groceries are killing you.

If you value organic food that much, I would suggest cancelling the cable immediately. The money for FIRE has to come from some where, and those are your main places to save.

Places like Aldi and Costco are carrying more and more organic. We did a co-op for one year, but we just couldn't justify the cost. I would look into more ways to buy the food you want.

Avidconsumer

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To be honest. I think you two are doing just fine. $1500 a month is a great amount of savings on your salaries. You're just at the beginning of your journey, so just accept that you cant compare yourselves to the majority on this forum just yet. You're probably a lot younger than the average poster anyway.

The guys posting on here(majority) that have a million in net worth or more are either on silly salaries or old enough to be your parents. Have put in their hard graft throughout their lives and genuinely looking forward to retirement. Don't get caught up with some of the numbers you see posted on here as I'm sure it is a fair exaggeration of the average guy on here. Might have contradicted myself here...

Travis

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Thanks everyone for the input...it was kind of all over the place...yet kind of not.

I do not  yet have a clear path, but I do certainly have a lot more to think about.

And whoever said Chiptole equals my retirement budget doesn't know how cheap Chipotle is...but I get your point...

That was me. I was assuming about $20 for two to a fast food joint.

Spondulix

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Sarah, to be frank your personal convictions appear to be clashing with your financial and future living goals.  I understand the desire to work how you want, buy local and organic, and not work for "the man," but if you want to achieve your financial goals you're going to have to be flexible on some of these things.  That lack of traction you're feeling has a lot to do with your competing goals and spending too much on the inefficient life you're currently living.
-
Recently on Shark Tank there was a backpack business started by two college grads in their 20s. Part of their model was to give a portion of their profits as micro loans (think Kiva), hiring adults with disabilities, and keeping the product price low to be affordable. Mark Cuban made a point - something along the lines of "so what if you're philanthropic if your company can't survive." The cart is coming before the horse, so to speak.

In just one year, the cost of eating local is an extra $200 extra a month ($2400 a year). Not taking a full time job (and the cost of commuting) is probably costing $15k. That's almost $18k a year (if not more) just to hold onto two personal convictions. That's pretty significant when you're talking about $60k a year total.

The thing I wish I had known out of college is that early career choices aren't permanent. You do whatever you need to get by, and the adapt as opportunities come up. Maybe try as an experiment - If you had to live on one salary, what would you cut or do differently? Use that to help prioritize what you actually need and what is a premature lifestyle choice.