Author Topic: Case Study: How Big is Your Mustache?  (Read 8525 times)

thesaffs

  • Guest
Case Study: How Big is Your Mustache?
« on: October 03, 2013, 10:47:04 AM »
Because ours is nonexistent.....

Hey there! My husband and I have recently become obsessed (too strong? Intrigued) by this blog and the ideas in it. We are in a major DEBT EMERGENCY and want to be little Mustachians, but suck pretty badly at it. No, really.

And so lately, we've been asking ourselves: WWMMMD? (What Would Mr. Money Mustache Do?) And as we formulate a game plan to annihilate our debt and retire in the next 40 years (kidding), we also question ourselves and our decision making.

Would you be willing, as your leisure time permits, to tell us what the hell you would do if you were us?

Us: married couple in their late 20s, both with master's degrees in their fields, a 2 year old and another bambino due January 8th, living in one of the cheapest cost of living cities in the country. My husband is a Speech Pathologist at a hospital in the ghetto of our city (read: 20 minute car commute from house through some unsafe areas.) He makes $27.50/hour, which after all the crap they take from the check, leaves us about $3200-3400/month take-home pay. For the sheer fun of it (OK, lying here), he also does home health contract work several nights a week for $60-65/hour plus mileage. It is not consistent work and sometimes he'll go 6 weeks or more without patients. I stay at home with our daughter (no childcare costs) and moonlight as a humanities professor at our local university two nights a week during the school year. 8 months of the year I bring home $1360 after taxes, but will be increasing that as I switch to teaching online only (maximum income: $2200/mo after taxes with the summer months being lower in pay due to less classes to teach.)

Total income: anywhere from $3200 (not enough to cover monthly expenses) in our bad months to $5300 when we're rocking it.

Monthly expenses:
$925 mortgage & insurance
$200 utilities (avg)
$103 car & personal item insurance
$42 life insurance
$600 food
$400 gas
$1108 debt payments (student loans, credit cards)
$160 childcare
$80 internet and security system package (no cable)
$100-400 Misc variable expenses (dog medication, people medication, medical bills, professional dues, toiletries, gifts, etc.)

Assets: a $136k house with little to no equity, (bought Dec 2012 at 3.25% interest rate) but a lower than rent payment of $925/mo which includes property taxes. Live in the heart of the city with grocery stores, library, shops, parks, etc, within walking/biking distance. Two paid for 10 year old+ cars (1999 Jeep Cherokee and 2000 Toyota Avalon), valued at around $7k total. Belongings are mostly hand-me downs, and we've already sold all the stuff worth anything. A sad little $1000 in savings and a couple thousand in retirement accounts.

Liabilities: Nearly $117k in debt, between student loans ($100K of that), credit cards, and a family loan....not including our mortgage. Yep, we were idiots in our early 20s and are still recovering from it. Debt payments total around $1100/mo for the minimums.

Lifestyle: Nonexistent. We buy all our clothes used, rarely go out to eat, enjoy free activities, etc. The occasional travel to see family in Chicago and CA. Mostly free childcare (me!) We eat healthy, try to exercise by running or walking outside, and take good care of ourselves, but our work schedules make some of that difficult.


Question(s) for you Mustachians out there:
How would you propose getting out of this debt emergency? We used debt snowball software to calculate that an extra $1000/mo (on top of minimums) toward debt would pay off everything in 5 years. If we can get crazy, balls to the wall (excuse the expression) and pay an extra $2000/mo, we're looking at 3 measly years! But we also are expecting baby# 2, which means a slight reduction in income (mine and husband's contract work) for the month or two at the first of the year and medical bills (guessing $1500-2000) because our hospital provided insurance is terrible. And since one of us works every single night of the weekend, we're exhausted, stressed, and chronically sick. Much our extra income the last month or so has gone to paying medical bills from being sick. We worry that we cannot keep up this pace for 3-5 years.

Surely there must be something else we're not thinking of, income-wise or otherwise, that would allow us to get our debt down and not be working 5 nights a week and a full-time job? Or wishful thinking?

Some of our ideas: sell 1 car (profit $2.5k) and cut insurance/gas costs ($100-150/mo); hubby switching careers or doing full-time contract work (potentially lucrative at $60/hr, but not consistent and no health insurance/benefits.) Hubby switch to sister hospital 1.2 miles from house IF a position ever opens up. Then he could bike to work. I need to be home to take care of the two kiddos, but am actively trying to increase my pay at the university and hope to have it up to $2200/mo by next fall.

So if you happened to actually read this far and want to further waste some of your brain power helping some Mustachian wannabe's, let me know how we can change our path and kick the debt-bitch to the curb!

Many thanks!

And as a plea: please be nice. We know we got ourselves in this stupid place, but are trying REALLY hard to change. I've posted to other financial boards before (not mentioning names) and people are just nasty mean! Let's be friends, OK? :)
« Last Edit: October 03, 2013, 07:41:29 PM by thesaffs »

Zamboni

  • Handlebar Stache
  • *****
  • Posts: 2493
Re: Case Study: How Big is Your Mustache?
« Reply #1 on: October 03, 2013, 11:00:47 AM »
Welcome!  Before I say anything about debt, I'm curious: what the interest rates are on your student loans?  credit cards?

Based upon what your wrote, it seems like you need to actively focus on your babies and wellness, so I almost hesitate to say this:
Can you teach online AND on campus to earn money?  Is there more than one local school you could work for?  Can you get a "full time" university teaching position that pays better and has benefits?  Those types of jobs can be very amenable to part time child care.

This also goes without saying:
You and your husband should BOTH ask for raises.  The worst they can say is no.  Read "Ask for it" or some similar book to psych yourself up to do it, if necessary.

At your age I would focus on increasing income, which in turn makes it easier to pay off the debt as long as you dedicate ALL raise money to that until it is gone.  At the same time, be sure to definitely continue to contribute to any available retirement plans.

thesaffs

  • Guest
Re: Case Study: How Big is Your Mustache?
« Reply #2 on: October 03, 2013, 11:39:19 AM »
Thanks for your quick response Zamboni!

Our interest rates on the student loans that are unsubsidized (which is most of them) vary between 4-6.55%. Our interest rate on one credit card is 17.99% and the other is 19.99%. Our initial goal is to pay the two cards down like our pants are on fire, then focus on the student loans. But let me know, Mustachians, what you think on that.

I'm hoping to do exactly what you suggested and teach 1-2 sections on campus and several more online or all 3-5 sections online. The university caps us at 5 sections per semester (regardless if in person or online), so that would be the $2200/mo max I mentioned. Since I don't have my doctorate, I am not eligible for a full-time teaching position pretty much anywhere. Universities have gotten pretty snobby these days, but they'll let me work as an adjunct. The only issue with me staying on campus is that it is a 30 minute commute 2x/week, so that necessitates two cars plus gas since we work on opposites sides of the metro. I'm going to keep my eye out for an adjunct job at a closer school, but there are a bunch of us dumb humanities people running around looking for these elusive teaching jobs. :)

I've considered an additional part-time job for myself, but the most I could make is $10/hour or so, while my husband's PT job makes $60/hr. So we've dropped that idea.

Agree on raises...funny enough, my husband received "Employee of the Year" at his hospital this past month, and received no monetary award. Might give you an idea of the type of employer he has. We live in an area with many energy companies who pay substantially better than what he is making. He is working some connections to hopefully switch into that field in the next 6-12 months. Starting pay would be more like $60-70k, but with incredible upward mobility, which does not exist in a hospital setting. Would be a huge learning curve, but he likes challenges.

So just to repeat: keep paying on retirement accounts? We stopped because we thought we needed to push every ounce toward debt, but will gladly take any advice on it! Would love to hear more on that....
« Last Edit: October 03, 2013, 12:03:39 PM by thesaffs »

gimp

  • Handlebar Stache
  • *****
  • Posts: 2348
Re: Case Study: How Big is Your Mustache?
« Reply #3 on: October 03, 2013, 12:15:26 PM »
I'd pay off the credit cards ASAP. Though if there's employer matching on 401K, I'd do the math to see what makes more sense, but I'd still probably pay off the credit cards ASAP.

Zamboni

  • Handlebar Stache
  • *****
  • Posts: 2493
Re: Case Study: How Big is Your Mustache?
« Reply #4 on: October 03, 2013, 02:33:06 PM »
Quote
my husband received "Employee of the Year" at his hospital this past month, and received no monetary award.

Sounds like the PERFECT time for him to ASK for a raise!

As far as retirement savings go, you have to consider a couple of things:
1) At a minimum, you MUST put in enough money to get the maximum match if one is offered.  If you don't do that, then you are flushing money down the toilet.
No brainer.
2)  The money is removed pre-tax, so a bigger pile of it gets to grow than would if you put it in your savings account, for example.  And then it AND the interest it earns compounds.  This is extremely powerful for younger earners.  Any coins you toss in that bucket now will be overflowing the buckets will bills when you retire due to compounding.  It's easy to excuse yourself from contributing (we need to pay off debt, we have extra expenses because of the babies, we have to pay for expensive soccer shoes for jr, whoops now we need new shingles for the roof, we have to pay for college.)  But, once you start that mentality, you'll end up like the folks who get to be 50 and realize they have NOTHING saved.  Unfortunately most people fall into this trap.  I say get into the habit of contributing now even though you still have debt.

Since you teach, I highly recommend the book "Millionaire Teacher."  It shows very clearly how even making a small regular contribution to your own retirement now will pay off in a huge way down the road.  You won't be able to "catch up" later as easily as you might think.

Obviously crush that credit card debt ASAP, but don't use that as an excuse to short change your future self out of retiring!

thesaffs

  • Guest
Re: Case Study: How Big is Your Mustache?
« Reply #5 on: October 03, 2013, 07:31:57 PM »
Thanks Dmy00013 for your suggestions. I'll try to touch on all your questions as best as I can.

My studies were in art history and museum work, so I am qualified to work in education, museums, non-profits, etc. I have taught high-school full-time before, but my take home pay was around $2000/mo. Pretty soon (by next fall) I will exceed that amount working entirely from home. If I go full-time at another job, I'll expect to make around $30k/year, but childcare won't be included (at least not any job that I can think of or have researched in the past.) Conservatively speaking, childcare for two kids would exceed over half of that income, making it useless in my mind to not see my kids for 40+ hours/week. I like the idea of taking on more part-time work, but for every hour I leave the house to work, I have to pay someone else $10 (no family nearby.) So I have to take that into consideration. I do freelance editing work, so I am working on building that business, but it takes time and the field is competitive (lots of unemployed writers/editors running around these days!) My goal in the next 1-2 years is to increase my net income to $3k/mo while working entirely from home. I'd say that's pretty good, right?

Since my husband is in the medical field, he already makes double what I can, and he can potentially (in time) triple that. We're trying to hold off on major decisions until the spring when the second baby arrives since we need the insurance and all that until then. But he is open to switching careers. He's had several professional meetings with very good contacts at some area energy companies and his resume is getting passed around. So fingers crossed, something pans out with one of those. If someone offered him a competitive amount to leave the hospital and start tomorrow, I have no doubt we would jump on it.

I called my cards several months ago to lower my interest rates, spoke to 3 different reps each time and wasn't able to get them to lower it. But I will try again tomorrow, and I appreciate the reminder. There is nothing I want more than to see those balances at zero, so believe me, we're attacking that portion of our debt.

We own a 1999 Jeep Cherokee and a 2000 Toyota Avalon, both paid for in cash. Right now we need two cars because my husband's FT job is 20 minutes south of our house, but he also does home-health, which takes him to patients' homes all over our metro 3 nights/week. My job is 30 minutes north of our house, but once I go fully online this spring, we won't need two cars at that point. Our schedules overlap just enough right now that we can't switch out cars midday. We're hoping to sell the less Jeep in December once I wrap up things at the university. And ideally, one of these energy jobs will put him in biking distance to work (we live near several of their campuses), so we can further reduce our need for a car. If I'm working from home and he's biking to work, I anticipate that saving us a minimum of $300-400/mo in car expenses, not accounting for maintenance, tags, etc.

My husband's work does a 3% match on the first 5% we contribute to his 403B. My work does not contribute to mine at all since I'm technically contract.

JT

  • Stubble
  • **
  • Posts: 146
  • Location: NZ
Re: Case Study: How Big is Your Mustache?
« Reply #6 on: October 03, 2013, 08:02:13 PM »
Hello!  And welcome! Before we launch into anything I believe it's important to recognise you are in a powerful position without even knowing it because you have made that first step on the path of getting yourself out of your debt emergency.  Many people wouldn't know a debt emergency if it bit them.   

To review the debt:

Mortgage $136,000
Other debt $117,000
Total liabilities: $253,000

Breakdown of debt:
Family loan interest rate ?
Mortgage interest rate 3.25%
Student loan 4-6.55%
Credit cards interest rate 17.99% and 19.99%

Debt repayment per month: $1,100

To get a feel for your mortgage payment all by itself, I plugged in $136,000 at 3.25% on 30 (??) years Principle and Interest loan into a mortgage calculator and it returned a monthly payment of $591.88.

This leaves $508.12 per month for the rest of the debt.

I would pay attention to the debt with the biggest interest rate and pay that down as quickly as possible.

The credit cards are an emergency and we're talking pants on fire emergency - just like you say.

Is there any way you could extend your mortgage to pay off the credit cards?  The difference between 19.99% and 3.25% is huge and savings could be made right there.  I don't know the terms of your mortgage though (do you pay once a month or fortnightly, what's your term, how is it structured?).  I do know little amounts can add up to big amounts, so even small savings can make a difference.

Alternatively, is there any opportunity to restructure the mortgage to interest-only for a year or two so that you could use the extra cashflow to pay down the more expensive non mortgage debt.

Also, do you rent your house out when you go visit family?

I'm at a slight disadvantage cause I live in NZ and am not familiar with USA legislation, tax, housing or mortgages.

Let's review your annual figures:
Annual income $38,400 pa to $63,600 pa
Annual liability $13,200
Annual expenses ???

Residual (excluding annual expenses) equals $25,200 to $50,400

What are your annual expenses? 
Are you able to make a list of your monthly costs like electricity, phones, internet, groceries, petrol, etc etc.
If you can do this, have a look at each cost to see if you can reduce any.  You seem to be living quite frugally already but without any knowledge of your figures, I can't know for sure.  Check out some of the case studies on MMM with an eye on how the expenses are listed out.  You could even compare your expenses to get an idea of how you're going.

Do you use Costco for groceries and Craigs List - these seem to be cheaper (from what I've read!)

Can your house help pay the mortgage?  Do you have a spare room/shed that could be rented out?

Is there public transport you could use instead of a car (if it's cheaper!). Could you drop down to one car and one motorbike?  Riding a pushbike everywhere is extremely cheap, and good for your health - subject to the city you live in.  Auckland is a shocker for riding bikes around so I've taken extra particular care finding a route to work that minimises the hazards.  I do love riding my bike cause it's a veritable cash machine and gets me fit (hills, hills and more hills!).  eg: Public transport here costs $1.62 per stage, I work five days and there is one stage between home and work, so 10x 1.62 = 16.20 per week.  16.20x 52 = 842.40 per annum.  842.40x 10 = 8,424.00 per 10 years.  This is enough to pay for your two cars!!  Or a visa card!  I've done this to show you the power of small change.

On the income side, any increase will help relieve the pressure of paying down your debt.  On top of this, it's really important to keep paying into your retirement funds, especially if there's an employer matching scheme.  At your age even small contributions can grow big. (See my public transport example.)

You say your debt timeline is three to five years.  This is an admirable goal and I'd urge you to read MMM's The Power of Positive Thinking, if you haven't already.  In five years time, you will have the debt reined in plus some pretty impressive experience in the budgeting department and this will mean you'll grow a stash in good style!

One last thing - frugal is not cheap!   A friend of mine lives in the back yard of her mother in law's property.  She lives with her husband in a very small shack that he made with his own bare hands.  It's tiny, and she's felt bad about it for a very long time.  But recently, her head space changed and she's starting to see she's actually in a good position.  She made the shift from cheap to frugal and is so much better for it.















JT

  • Stubble
  • **
  • Posts: 146
  • Location: NZ
Re: Case Study: How Big is Your Mustache?
« Reply #7 on: October 03, 2013, 08:31:52 PM »

Total income: anywhere from $3200 (not enough to cover monthly expenses) in our bad months to $5300 when we're rocking it.

Monthly expenses:
$925 mortgage & insurance
$200 utilities (avg)
$103 car & personal item insurance
$42 life insurance
$600 food
$400 gas
$1108 debt payments (student loans, credit cards)
$160 childcare
$80 internet and security system package (no cable)
$100-400 Misc variable expenses (dog medication, people medication, medical bills, professional dues, toiletries, gifts, etc.)

Thanks for these.

As you say, your expenses are greater than your income in a low income month and your credit cards have high interest - this is a bigger emergency than I first thought!

Look very carefully at your expenses and cull the costs you don't need.  This is really important, as you have a debt emergency. I would say $100 to $400 on miscellaneous is too much, can you cut some expenses here?  Also is $80 internet right?  Is there something cheaper you could get?  No cable is great, because that just wouldn't make any sense given your debt emergency.  $600 for food, I use $500 for food per month, but I am in a different country so don't know if your figure is good or bad.  Your utilities plus gas is $600, is this the best price you can get in your area?  And can you go without the gas?  I have cut my contents insurance completely, shopped around for medical insurance (but put a high excess on), and reduced full car insurance to third party only.  Can you do this too?  Have you got the best deal for insurance?  I still can't see the exact amount for your mortgage - can you restructure it to give you more cashflow in the next year?






CU Tiger

  • Bristles
  • ***
  • Posts: 463
  • Location: Mid-Atlantic USA
Re: Case Study: How Big is Your Mustache?
« Reply #8 on: October 04, 2013, 09:24:16 AM »
You mention that your “Other” expenses are $1400 a month. Too broad. What are you really spending money on? You can only control what you can track. It’s time to start writing down everything you spend. If you spend $3 a day buying a soda and snack, write it down. If you go out to eat twice a week, spending $25 each time, write it down. When you fill up the gas tank, write it down. Don’t beat yourself up over what you are spending, but write it down, then look at the big picture and ask yourself whether you are really being frugal. Some of your expenses may be in line with your values and goals to get out of debt. Others may be ridiculously spendy choices that are harming your bottom line. Whichever they are…you need to KNOW what you are spending and WHERE you are spending it.

Liabilities:
Mortgage payment: $925
Student loans ($100K of that) at what interest rates?
Credit cards,
and a family loan how big is that one?

Lifestyle: Nonexistent. We buy all our clothes used, rarely  never go out to eat, enjoy free activities, etc. The occasional travel to see family in Chicago and CA needs to stop now. Mostly free childcare (me!) We eat healthy, try to exercise by running or walking outside, and take good care of ourselves, but our work schedules make some of that difficult. Fixed some of those things for you.

Stop travelling to see family for a little while. It doesn’t mean you have to not see them, invite them to come to you. Yes, you’ll still spend to feed them some nice meals, but it’s a lot cheaper than flying/driving cross country. I think it’s very important to keep up family ties, but if you can’t afford to pay for a drive/flight without debt, you can’t afford it. Think of the people who used to move across the country with no expectation of EVER seeing their families again. I am sure it was tough, but you make your choices and have to live with them. We at least can talk on the phone for cheap and email daily…our foremothers would think we were the luckiest people in the world…

And since one of us works every single night of the weekend, we're exhausted, stressed, and chronically sick. Much our extra income the last month or so has gone to paying medical bills from being sick. We worry that we cannot keep up this pace for 3-5 years.

I am going to say that while I hate debt, I also don’t think that ruining your health and quality of life is worth it to get out of debt. I also think that if you truly commit to ninja frugality, it will take you less time to pay off your debt. Every dollar you do not spend is one less you have to earn to live, and one more you can use to pay off debt. Because look at the sentence highlighted above…how is that helping? Being so tired and sick that you spend your extra cash at the doctor isn’t moving you toward FI.

Why not start looking after some other children including yours? Once your new baby is six months old or so, you could start watching two more kids about the same age as your older child (2-3 years old). You are at home and going to the park, library, etc., putting the kid down for naps…you could do that for two more kids too and make money while you are at home. It might cut down the amount of time it will take you get rid of your debt.

Other ideas:

Sell one car. That will save you in: gas/oil changes, insurance, etc. It may make your life a little more “local” (no hopping in a car on the spur of the moment) but that’s not necessarily a bad thing. This works especially if you begin working 100% online.
Something that can pay some serious money, especially if you do it at the holidays is to pet sit. No kidding- there is gold in them thar’ pets. My husband and I have two (used to be three) cocker spaniels who LIVE THE GOOD LIFE. One of our late dogs was so neurotic that we had to stop boarding him. Having someone stay in our home with the dogs was just easier and the dogs didn’t come home stinking of kennel with stress colitis. If you and your husband worked together on this at the holidays, you could probably either pet sit for someone in their home during their holiday vacations, or you could take in a couple of dogs to your house. It may interest you to know that when we had three dogs, we paid $75 dollars a day to our house sitter because they were taking care of two elderly dogs who were on medication and a third who was younger. They walked the dogs three times per day, gave medications, and slept at our house. The rest of the time they were off doing whatever they did in their real life. Some of them had jobs they went to; others were full time pet sitters/house sitters. They got in the mail and watered the plants. Other than that they watched our tv, used our internet connection, and because we were so grateful to find reliable adults to look after our “kids” we invited them to help themselves to whatever food they found in the house.
Or stop by and see everyone in the neighborhood to see if anyone wants their dogs walked for $7 a pop. If you could average 5 dog walks a day 5 days a week (while you are at home anyway) you’d make an extra $700+ a month to send towards your debt. Plus, you could pop the kids in the stroller and get them outside with you and your legs would look like a model’s with all that healthy exercise!

mustachejd

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: Case Study: How Big is Your Mustache?
« Reply #9 on: October 04, 2013, 11:27:56 AM »
I stay at home with our daughter (no childcare costs) and moonlight as a humanities professor at our local university two nights a week during the school year. 8 months of the year I bring home $1360 after taxes, but will be increasing that as I switch to teaching online only (maximum income: $2200/mo after taxes with the summer months being lower in pay due to less classes to teach.)

If I were you, I would also look into tutoring if the online teaching doesn't pan out or if you want even more additional income.  I charge $75-$125/hour to tutor middle school, high school, and college students.  Since you already teach at the university level, I bet you could easily charge a great deal more.  I don't know where you live, but if your family is relatively close to a metropolitan area or university, there will always be incredibly anti-mustachian parents who are more than willing to throw $$ at you to ensure their kids get straight As.  In terms of attracting clients, when I first started teaching, I completely blanketed craigslist, private school bulletin boards, and my friends' inboxes, letting everyone know that I was available to tutor. 

I used to charge a lot less, but then I realized that if I increased my hourly rate, all I needed was one or two students and I was set to make an easy $2000 a month.  I was actually quite sad when I did the math - after a few months of teaching, I realized that, on average, I made more money tutoring in 15 hours than I did working 80 hours at my real job, which requires a professional degree.  My partner said I should probably just quit my job and teach full time, but I absolutely love my real job.  Since we don't have kids and I still have plenty of time to pursue my other hobbies, I figure, that it's okay for me to do both for the time being. 

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4982
  • Age: 34
  • Location: Seattle, WA
    • My blog
Re: Case Study: How Big is Your Mustache?
« Reply #10 on: October 04, 2013, 12:14:46 PM »
I would sell both of your cars and replace them with a single fuel-efficient one. Your current vehicles get about 16 MPG (Cherokee) and 22 MPG (Avalon). This is unacceptably high. If you had a car that got a more reasonable gas mileage (such as 40 MPG or 53 MPG), you would save $200/month on gas even if you drove exactly the same amount.

Also, take that $1000 you have in savings and put it toward your credit card balance. Right now. Why would you keep money saved at almost 0% interest when your credit cards are charging you 20%? You are literally spending about $15/month to keep that money in savings instead of paying off your debt.

Also, suspend all retirement account contributions until this credit card debt is paid off. After that, take the money that you're currently using to pay off the credit cards and split it evenly between accelerating your student loan payments and resuming your retirement contributions.
« Last Edit: October 04, 2013, 12:16:22 PM by seattlecyclone »

jrhampt

  • Handlebar Stache
  • *****
  • Posts: 1073
  • Age: 42
  • Location: Connecticut
Re: Case Study: How Big is Your Mustache?
« Reply #11 on: October 04, 2013, 12:27:33 PM »
A couple of things stand out to me when looking at your expenses:

Why are your utilities so high?  Are you using energy-saving appliances, CFLs, being conservative on the thermostat, etc.?

Why do you need a home security system if you have a dog?  You lump this together with internet.  Are you at the lowest (3mbps) speed for this?  Seems like this category should be at most $40/mo, rather than $80.

As someone else has mentioned, your misc category is too large a range - you need to get a sense of what you are averaging each month on this.  I would cut out gifts entirely while you still have credit card debt.

NeverWasACornflakeGirl

  • Stubble
  • **
  • Posts: 231
    • Mommy Won't Work
Re: Case Study: How Big is Your Mustache?
« Reply #12 on: October 04, 2013, 12:47:54 PM »
If I go full-time at another job, I'll expect to make around $30k/year, but childcare won't be included (at least not any job that I can think of or have researched in the past.) Conservatively speaking, childcare for two kids would exceed over half of that income, making it useless in my mind to not see my kids for 40+ hours/week. I like the idea of taking on more part-time work, but for every hour I leave the house to work, I have to pay someone else $10 (no family nearby.) So I have to take that into consideration. I do freelance editing work, so I am working on building that business, but it takes time and the field is competitive (lots of unemployed writers/editors running around these days!) My goal in the next 1-2 years is to increase my net income to $3k/mo while working entirely from home. I'd say that's pretty good, right?


I agree with most of what CUTiger said, but I'm going to give you a bit more tough love.  Keep in mind that I am also a mother, and these are sacrifices that I have made myself.  If you are going to read this and tell me why you can't do it, I am not going to believe you because I already know it can be done, and you've got some compainypants syndrome you need to cure before you can really get rid of this debt.

First off, why is your husband working so much while you work so little?  Isn't it important for him to spend time with his children, too?  I don't care that he makes more per hour than you do.  I also don't buy it that "childcare for two kids would exceed over half of that income, making it useless in my mind to not see my kids for 40+ hours/week."  So $15k a year to get rid of your debt is "useless?"  Staying home with your children is a luxury you gave up when you racked up over $100k in debt.  You also need to find more ways of making money, as CUTiger said.  I went for a Humanities Phd, too, and then realized it was a luxury I could not afford.  You can't afford to wait around for the right teaching job to come up.  It's not going to happen.  Find some other skill and use it to make money.  I went back to work when my daughter was 3 months old.  Did it feel like my heart was being ripped out?  Yes.  Did we all survive and thrive?  Yes.  She's 8 years old now and a wonderful person.  Daycare (not a nanny, which is another luxury you can't afford), is not the end of the world.  Suck it up and make some money to pay what you owe.  The entire burden should not be on your husband.

I also don't understand $600 a month for food for two people and a two year old.  Are you eating filet mignon every night? 

Selling the second car is a no-brainer, as is the suggestion of getting rid of both of them and getting something with decent fuel mileage.  If you live within walking/biking distance of everything, how are you spending $400 a month in gas?

I also don't understand the $160 a month for childcare.  When do you need childcare?  If you're not going out (and you shouldn't be), when are you getting a sitter?  If you do need occasional childcare, what about a babysitting co-op where you and other parents in your neighborhood swap babysitting services? 

I agree with jrhampt about the home security system as well.  Why?  Security systems are a rip off.  Put up a sign outside your door saying you have one and call it a day.  You have a dog.

You also state that your mortgage and insurance cost is $975 per month and this is better than paying rent.  I'm assuming that this includes mortgage interest as well.  But what does it not include that rent does include?  Home maintenance.  You have lived in this house for less than a year, so you may not have experienced some of the true fun of home ownership.  The sewer pipe is cracked and raw sewage is now coming up into your house -- get ready to fork over $9,000.  The furnace stops working, the roof starts leaking, you realize there's a funny smell in the baby's room and guess what?  You've got black mold!  The dog figures out how to escape the fence around your back yard and you need a new fence.  I don't know who gave you a home loan when you have so much debt and so little income, but you should sell this house and rent an apartment.  You have not yet begun to experience how much money a house will suck out of you.

I know this sounds harsh, but you have over $100,000 in DEBT!  That's a LOT of zeroes!!
« Last Edit: October 04, 2013, 01:06:54 PM by Trina »

daverobev

  • Magnum Stache
  • ******
  • Posts: 3384
  • Location: France
Re: Case Study: How Big is Your Mustache?
« Reply #13 on: October 04, 2013, 01:02:07 PM »
Credit cards are *the* emergency. 6% on student loans - yes, you want to pay them off ASAP but don't *kill* yourself doing it. You made that choice, and you are where you are - educated, employable. Obviously ideally pay them off as soon as you can, but 6.5% or whatever compared to the credit cards is totally bearable.

See if you can apply for a zero percent balance transfer deal to pay off and destroy a higher interest card. Assuming your utilisations aren't too bad. Focus on one card, probably debt-snowball method if they are within a couple of percent of each other. Do NOT use the 0% to take on more debt - that way lies insanity.

$400 on petrol is crazy talk.

$600 on food is also crazy talk. You should be able to get by on half that, or less. But you have to think 'outside the box' - buy a Diva Cup, for example, if you don't have one already (ok not relevant while you're pregnant). Use cloth nappies. Not sure if you have peak/off-peak electricity, but if you do - don't do laundry during peak times! Line dry your clothes. Walk, cycle, run places. Spend a little time figuring out what is cheap in a given week - stock up on pasta when it's on sale, for example.

Good news - you can pull yourself out of it, it'll just take a little time. Time you have - you're young, and have your education done. But now you just need to go, ok, no more money is to be spent until a) credit cards are at $0 b) student loans are on their way south. Like, seriously, none - no films, no Amazon, nothing! Hard.. but it'll help you in the long run.

Exflyboy

  • Walrus Stache
  • *******
  • Posts: 6404
  • Age: 58
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Case Study: How Big is Your Mustache?
« Reply #14 on: October 04, 2013, 02:33:13 PM »
Mostof this has already been mentioned but,

1) The credit card debt is the absolute #1 priority.. I honestly would not bother contributing to ANY savings, even partially matched 401k's until you got the CC paid off.

2) So both your cars are monster SUV's?.. How about selling them both and buying a 35mpg plus compact car.. I'm a fan of the Dodge Neon which can be picked up for dirst cheap.. I just bought a 99 sport model in fantastic shape for $350... yes three hundred and fifty bucks! This would more than likely free up more cash and allow you to engoy 35mpg and halve your fuel costs!

3) I'd question the need for the life insurance.

4) why $160 on childcare if you do this yourself.

5) When you have paid off your CC's, take that money and apply it to the next higest interest rate loan (student loan) (now you can start contributing the 401k plan again.

6) When all that is taken care off, take all those savings and start paying off the mortgage.

7) When the mortgage is payed off start maxing out the 401K and saveing additional.

8) can you rent a room out in your house??


You will be out of debt before you know it...:)

Frank

legacyoneup

  • Stubble
  • **
  • Posts: 104
Re: Case Study: How Big is Your Mustache?
« Reply #15 on: October 04, 2013, 02:52:18 PM »
Hi... not sure how this might be received but here goes :
1. What do your parents do? Are they retired and do they have a home of their own ? If yes, could they move in with you guys to assist and lease out their own home? If this were possible, could you get a better paying full time job?
2. Could they give you a low interest or no interest loan to pay down any CC debt or personal loans with high interest rates?
3. Could you rent out any rooms in your house?
I understand that the nuclear family is part of the american way but in the long run, the strain you guys are under is going to take its toll. Its just might be better to team up with other family members and tackle this together.



Zamboni

  • Handlebar Stache
  • *****
  • Posts: 2493
Re: Case Study: How Big is Your Mustache?
« Reply #16 on: October 04, 2013, 03:37:10 PM »
Based upon what you've said, I think your husband should continue with his 5% into the 401k to get the 3% corporate match.  Otherwise you are turning down free money.  Everyone agrees to make those CCards top priority over everything else.

Others have lots of good advice.  The specifics are important, but it can be summed up in what one old friend of mine used to say:  time to tighten your belt.

Get rid of those expensive cars to save on gas money and figure out how to trim the food bill by at least $100 or more a month.  Work more and/or find jobs that pay better.  Track your expenses compulsively until you know where your money is really going, because right now it seems like some of it is frittering away.  NO, you don't have money for date night, or a movie at the theater, etc.

bawaboy

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Case Study: How Big is Your Mustache?
« Reply #17 on: October 05, 2013, 08:39:52 AM »
Great replies from everyone - something to think about:

Since you are home with your little bundle of joy, why not open your house to others? My wife found a great way to make extra income since giving up her full time job to be home. Every morning during the school year, we have 8 kids come over between 7-730am and stay with us until the bus picks them up at 830am. In the afternoons we have those same 8 get off the bus and stay with us until their parents get off work (around 5pm). She feeds them breakfast in the morning and a snack after school.   She averages 3 hours of work per day (15 per week) and make $425 cash per week. Can't beat it!


MelodysMustache

  • 5 O'Clock Shadow
  • *
  • Posts: 98
Re: Case Study: How Big is Your Mustache?
« Reply #18 on: October 05, 2013, 11:21:42 AM »
I agree with most of what is said here except this "I'd question the need for the life insurance."

I am a young(ish) widow and based on my experience, I believe term life insurance for non-financially independent parents with young children is a necessity.  When you are on solid ground then re-evaluate it.  That being said make sure you are on term insurance at a good rate.

Exflyboy

  • Walrus Stache
  • *******
  • Posts: 6404
  • Age: 58
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Case Study: How Big is Your Mustache?
« Reply #19 on: October 05, 2013, 01:01:36 PM »
On the life insurance, yes I can see how that would be important to you. I guess we are all guilty to some degree of thinking our personal situation applies to everyone.

We don't have kids so of course we have a different outlook.

I believe you can get out of the hole from where you are though. It is going to take some sacrifice but admitting you got a problem is a HUGE step.

I have a young friend who has NOTHING.. and in the next breath is posting pictures of her sitting in a  beautiful Mustang convertible she somehow managed to get a loan for.. She then proceeds to tell me she can't make any payments on the CC's so she just ignores them.

This gal can barely afford the gas to run the thing.

She has no clue anything is wrong and I'm clearly speaking in a foreign language to her!

mm1970

  • Walrus Stache
  • *******
  • Posts: 6869
Re: Case Study: How Big is Your Mustache?
« Reply #20 on: October 05, 2013, 04:31:59 PM »
$600 food, $400 gas, $100-400 misc =/= "non-existant lifestyle"

travelbug

  • Bristles
  • ***
  • Posts: 261
  • Location: Australia
Re: Case Study: How Big is Your Mustache?
« Reply #21 on: October 05, 2013, 09:04:29 PM »
oops, posted in wrong thread...

sleepyguy

  • Pencil Stache
  • ****
  • Posts: 671
  • Location: Oakville, Ontario
Re: Case Study: How Big is Your Mustache?
« Reply #22 on: October 05, 2013, 10:20:00 PM »
I'll just comment on your expenses.  These jumped out at me, and I'll comment on each

Monthly expenses:
$600 food
- for a family with a decent sized CC debt this is WAY too high, around 300-400 is ok.

$400 gas
- I'm guilty for driving 2 gas guzzlers as well (Subbies), but this is pretty killer... sell both and get a single are that has good mileage.  A used Pontiac vibe is a good vehicle that is cheap and drives til it rust apart (it's just a Matrix aka Toyota Corolla, in hatchback form with Pontiace clothing on).

$1108 debt payments (student loans, credit cards)
- just pay of the CC as fast as possible no question... it will be a HUGE lift off your shoulders.  I've had a 30k CC debt in the past (don't ask) and although I rarely fuss about finances... have to admit it kept me up a few nights.  SL, depending on the rate... pay it off minimum then attack it when the CC debt is gone.

$100-400 Misc variable expenses (dog medication, people medication, medical bills, professional dues, toiletries, gifts, etc.)
- top end $400 for misc is too high... split up the categories so you can track it more diligently.  I mean let's say a month you spend $375 for gifts... you look at it and say... "well i was within my usual limits"... hell no.  You get my point.

That's about it.
« Last Edit: October 05, 2013, 10:25:12 PM by sleepyguy »

thesaffs

  • Guest
Re: Case Study: How Big is Your Mustache?
« Reply #23 on: October 06, 2013, 12:28:16 PM »
Thanks everyone for your response, and I appreciate you taking the time to respond. Some of your suggestions were spot-on and helpful and will be put into action. Some responses....I'm not even sure what to do with because I don't believe my original post was read for full comprehension. The OP answers why we are logistically unable do things like live with family, rent out part of our house, sell our house, or both of us work full-time, etc. I know some of you are super-mustachian, but we are just starting. Completely overwhelmed even WITHOUT the "tough love" of putting my kids (one of which isn't even born) in daycare. And yes, I do know how much it costs and how much I am capable of making in a FT job. Again, addressed it an early post w/specific numbers and this is also a value based decision we have CAREFULLY made regardless. And please, reread old posts that I do have a job that allows me to work from home, and I am bringing in a nice income that will continue to increase over the next 12 months.

My husband and I have kept a zero-based, to the penny, category for EVERYTHING budget for 4 years now. I averaged our misc. accounts for this post because they do vary from month to month, but we keep them very low.  Anyway, we are focusing on the credit cards first and will move from there.

Thanks again to those who wrote kind and helpful posts as those have the most lasting impact on us rather than anonymous, online bitch-slapping. And future readers: don't worry about additional suggestions as I think we have enough to last us for awhile and will not be revisiting this post for sometime.