Author Topic: Case Study: I thought I was doing well....  (Read 13457 times)

mrigney

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Case Study: I thought I was doing well....
« on: December 09, 2013, 11:51:00 PM »
Mustachians (I wanted to say fellow Mustachians, but after reviewing my 2013 finances, I can't do it). I found MMM about 6 months ago. I considered my wife and I relatively frugal. No car payments, rarely take vacations (sans the 5 year anniversary trip to NYC we took this year...where we used hotel points to stay for free), etc. But I feel like we're treading water. As background on us, we're 29 and 28, a 2.5 year old daughter, and another baby due in February. I'd love to FIRE by 40-45, but just don't see it happening. My wife is a stay at home mom and we love that and is important to both of us (until the kids are in school, then I suspect she'll go back to doing something. She was/is a teacher).

My question in this case study is really simple. Where can I trim (I know a lot of the answers, but I need somebody to punch me in the face so it hurts)? What are my hopes for FIRE?

Income: $61k annual (gross) ($47k net or thereabouts). Or, more relevant to the conversation net pay of $3925/month.

I'll give a pretty detailed breakdown of expenses. All numbers are actual numbers based on the first 11 months of this year and numbers are per month averages.

Charity: $140
Food:
   Groceries: $598 (I know! We're shocked. We generally work hard to buy cheaply, buy real food, etc...we did just buy a half a hog for $450)
   Restaurants: $139 (slightly inflated by treating all of my moving help to food when we moved in August...also ate out more before and after move while boxed up)
   Coffee: $83 (no excuses. This is shocking to me. Somebody give me a punch hard enough to knock me out).
   Party food (food we buy to throw dinner parties): $15
Housing
   Mortgage: $984 (includes PMI)
   Electricity: $130 (running about $110 in the house we're in now)
   Water: $36
   Phone: $72 (this is for both wife and I, unlimited talk, text, and data)
   House Maint. & Repair: $56 (repainted house when renter's moved out and we moved back in)
   Cable & Internet: $69 (cable is going after the Olympics in February)
   HOA Dues: $16
   Netflix: $8
Personal
   Medical: $30
   Gifts (bday and wedding): $30
   Misc: $306 (this is the catch all...household items, random expenses that don't fit a category, fees, etc...and I know...it's high)
   Clothing: $25
   Haircuts: $22
   Pets: $101 (is there such a thing as a cheap pet?)
   Daughter's "stuff"  (clothes, diapers, wipes, etc): $26
   Fitness: $68 (this is basically zero now...I built a garage gym in our home for $750...now two guys are paying me $20/month to use it...my costs are about $10/month here)
   Books: $5
   Travel (mainly to weddings): $45
   Coaching $75 (I'm working toward becoming a personal trainer as my side hustle...I've hired someone to work with me on my fitness and to walk through the process of getting that side hustle going)

Recreation
   Discretionary for him/her: $41
   Entertainment/dates: $24

Automotive
   Gas: $233
   Insurance $103 (switched during year...now $59.53)
   Repairs & Maint: $36
   License & Fees: $29

Other
   Vacation: $111 (we took a 5-year anniversary trip to NYC)
   Student Loans: $156

Assets:
   Liquid/Cash: ~$7,500
   403(b): $12,200
   401(k): $1,800 (vested)/$2,300 (including employer match)
      NOTE: Currently deferring 9% of my gross + getting 3% company match.
   Vanguard Roth IRA: $3,400
   Teacher Retirement System Contributions (that I need to roll over to 401(k)): $4,500

   College 529: $5,600

   House: $160k-ish

   Cars: 1996 Nissan Maxima ($1k), 2009 Hyundai Sonata ($8k)

Liabilities
   Student Loans: $10,900 @ 2.75%
   Mortgage: $149,500 @ 4.00%

Questions: Where should I cut? There are obvious areas (coffee anyone?????), but where else should I be trimming? We're committed to 2014 being the year where we try to take our savings rate to 30% or higher (I'd love to get 40-50%, but not sure it will happen). With a job at $61k, with likely steady raises (engineering, stable job, etc), what are my chances of FIREing by age 45?

Thanks in advance for all the input!

Cheers,
Matt


gooki

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Re: Case Study: I thought I was doing well....
« Reply #1 on: December 10, 2013, 02:13:12 AM »
I'd use the money you save on food and coffee to pay down the mortgage to the point you can get rid of PMI. And then start investing your spare dollars.

Also look at cutting back your phone plans.

I think 45 is a very achievable target assuming you wife returns to work in 5 years time. Possibly earlier depending on pay rises, how your side hustle turns out, and you ability to avoid lifestyle inflation.

If you haven't already, you should read this:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

lhamo

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Re: Case Study: I thought I was doing well....
« Reply #2 on: December 10, 2013, 03:25:40 AM »
Your income seems rather low for someone in engineering.  I think you have more potential for increases there than room to cut much more off expenses.  I don't think there are that many people here saving 50% of a single income when they are a small family. 

But yes, food categories seems high (esp coffee!), as do electricity and gas for the car.  If the charity is tithing then I understand why you keep it, otherwise that might be something to cut back on a bit.  Try to find free or extremely cheap stuff to do on your date nights.  Track the random household spending more accurately to know where that goes. 

dantownehall

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Re: Case Study: I thought I was doing well....
« Reply #3 on: December 10, 2013, 06:56:17 AM »
My suggestions:

1)  Getting rid of PMI should be your priority.  This is wasted money!

2)  Coffee and groceries need to come down drastically.

dude

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Re: Case Study: I thought I was doing well....
« Reply #4 on: December 10, 2013, 07:26:25 AM »
Totally agree with the PMI advice -- that's just throwing away money.  Not sure how far off you are to getting to 20%, but paying down the mortgage aggressively to get rid of that is a good idea.

Also $22/month on haircuts?  That really adds up over 10-20 years!  Using this calculator:

http://www.calcxml.com/calculators/bud11?skn=#top

It adds up (assuming 7% interest) to $3830 over 10 years, or $11,527 over 20 years.  I'd recommend:

http://www.mrmoneymustache.com/forum/continue-the-blog-conversation/get-rich-with-the-universal-mens-grooming-device/

Bought mine -- barber quality -- for $54.


willn

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Re: Case Study: I thought I was doing well....
« Reply #5 on: December 10, 2013, 07:48:40 AM »
The "misc" category is too big.  Need to figure out where that is going and allocate it to specific areas.  Probably some fat to trim there.

Between that, and the coffee, I can see squeezing another couple hundred into savings easy.  Right now by my calculation you are saving roughly 1k/month? That's pretty good for a family with pets and a mortgage on your income but can get better.

The other glaring area is gas.  50+ dollars a week?  Set a goal to cut that in half, somehow.

Lots of people will say to keep the student loan, its free money to invest!  I'd rather take a very aggressive stance on that--knock it down fast and hard, use some savings to cut the principal in half in the next few months.  Same with your mortgage.  Can you refi and get a friendly banker to see that you have 20% equity?

Then, you'll be looking at an easy, what? 1500? 1700? into savings. 

Also, what's your plan to earn more?   I think an ambitious ass-kicking engineer would be able to double that income in 3 to 5 years by being a get shit done type of employee who works a few extra hours.  Or if you're not that turned on by working hard as an engineer, what's your side hustle going to be?

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #6 on: December 10, 2013, 07:49:52 AM »
Regarding the PMI. I've always felt like it was wasted money. I think right now it's $105/month. It was $65 or so, but almost two years ago refinanced from 5% to 4% (traditionally not enough to refinance, but we were moving out of state for a year and wanted to rent the house...that helped make it cashflow positive; brought payments down about $100, even w/the increase in PMI). It always seems so far away when I think about paying down the mortgage. If the house is worth 160-165k, we need to get about 32k in equity. That's another 18-20k to go. But advice taken.

@lhamo I agree that my income seems rather low:-) Long story short. I was in a job making just over $70k. Ended up quitting it to spend a year in ministerial work (kind of a "what do I want to do for the rest of my life" type year?). Took my current job about a year ago. Just a super market right now. I'm currently in talks with another company about a position which I hope will include a raise. Reality, though, is that even in my mid-sized, high-tech, engineering focused city, I'd say the average salary is 80-95k. And in 6-8 years if I stayed w/my current job, I suspect I'd be somewhere in that range. Cost of living here is low, so salaries are similarly depressed compared to other places in the country. I'll continue to look for ways (jobs) to up this b/c you're right...you can only do so much on one salary at $61k.

Re: groceries and coffee I have no excuse on the coffee. It's mostly me and it's become a habit...something I know I don't need but do anyway most mornings on the way to work (nothing fancy, just me depositing $2 every morning for what...a caffeine shot? Thinking about it disgusts me). My wife and I had a discussion last night about not just reducing the coffee trips, but just eliminating it (with a concession if we're on a long road trip like we will be at Xmas or if we need to meet someone there for a work or other type of meeting). Groceries are a little bit more of a mystery to me. Over the last year, we've probably seen our grocery bill go up by  $100/month. We're not eating any differently (maybe I'm eating a little more meat, but also eating a lot of chicken thighs from Costco) as far as we can tell. We try to be locavores as much as possible (the half-hog we just bought being an example), but generally speaking we eat a whole lot of chicken, some pork from our hog, some red meat (almost exclusively ground beef w/a steak thrown in maybe once every other week). We eat lots of potatoes, etc. Would it be helpful for me to break down my grocery spending and see where it's all going? Maybe that will be my January project.

Any other advice/facepunches? I feel like you have been easy on me so far. Our current expenses look like about $45k/year. Feel like I should have at least $10-15k to trim off there.

bogart

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Re: Case Study: I thought I was doing well....
« Reply #7 on: December 10, 2013, 07:58:51 AM »
What about your pets costs $101 per month?

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #8 on: December 10, 2013, 08:04:19 AM »
@willn Agreed that the misc category is too big. I was shocked as I crunched the numbers how big it had become. It's become the catch all for my laziness of not wanting to create categories for odd things. I might even go back and break out this past year's spending some in those categories. If we could trim $100 there an $70 from the coffee, that's another $170 there. We're considering trading in our Sonata for a Prius. W/the impending arrival of baby #2 we thought having the hatchback to throw the dog would be easier (dog park, etc). In addition, we could get a Prius w/ about 40-50k less miles than the Sonata for about $6k more. At our current mileage of about 12k/year (I know, I know...this includes a trip to each family each year, which is about 3k of those miles), we'd save 600-650/year. Stupid? We'd plan on driving the Prius into the ground. We're just afraid we won't be able to load everyone up in the sedan (two car seats, 2 adults, large dog) for a road trip to parents' houses. I have a 11 mile commute each way in a decidedly bike unfriendly city (I've biked it off and on and have more or less given up b/c of the # of bikers killed on local roads over the past year).

Re: income. My first plan is to see how this job situation w/another company in town plays out. Both subject matter wise and pay wise it should be better, but we're probably a couple of months away from that happening. Would love to double my income, but not sure that's super-doable. Limited # of hours to put in at the office w/two kids (although i've been putting in those hours lately!). Would like to grow the side hustle, which would be personal training. Potential for good money there if I can build a reputation. Have the two guys who use my garage gym currently, and a guy I know who I'm training remotely, but I'm doing that for free as a test case.

Thanks for the input. Bottom line I feel like is I need to increase income by at least 20k over the next couple of years and decrease spending by 25%. If I just did that, savings rate would be > 50%.

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #9 on: December 10, 2013, 08:07:16 AM »
@bogart. I hate the pet costs. I really do. We love our dog and aren't going to get rid of her, though, and I've pretty much decided that there's not much I can do lower them. It's a big dog, so food is about $35/month. Regular yearly vet checkup and shots is $200ish. Throw in a couple of trips to the vet (we had a $400 trip earlier this year...dealing w/some severe allergies...as in losing all of her fur allergies). Heartworm meds are another $150-200/year. Hoping we've got the allergies under control and 2014 will be better. But this is about as cheap as it gets for a large dog, as far as I can tell.

Anyone have a different take? Cheaper way to get heartworm meds for a big dog? What do you pay for a vet checkup plus annual shots?

TLV

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Re: Case Study: I thought I was doing well....
« Reply #10 on: December 10, 2013, 08:11:54 AM »
Why would a stay at home parent need unlimited cell phone? Look for IP Daley's communications thread for ideas, but you could probably meet your communications "needs" for $15-30 a month with a VOIP home phone and a couple of prepaid cells.

What tax bracket are you in? As long as you're paying any income tax, increasing your tax-deferred contributions is a better return than paying extra in those student loans, though getting rid of PMI is probably even better.

willn

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Re: Case Study: I thought I was doing well....
« Reply #11 on: December 10, 2013, 08:32:51 AM »
@willn Agreed that the misc category is too big. I was shocked as I crunched the numbers how big it had become. It's become the catch all for my laziness of not wanting to create categories for odd things.

Cool.   Allow me to riff on what's been effective for us.

My experience is that its nice to look back and see what we've spent, but more effective to set the forward strategy. Sure, I have looked back, but the important part in my life has been the budget.  You tell your money what to do rather than depend on past behavior.  It also reduces worry and regret.  Set a goal, stick to it as best you can, adjust if you make mistakes.  Takes a few months to get a budget really dialed in--that's that misc category!  Takes a cooperative and shared view with the spouse to stick to the committed amounts even if they are hard.

Before, I had always underestimated that short term, forward thinking tactic.  Long term, its easy to say "Save more in 401k" but the short term is where you make the decisions that enable that savings over the long haul.

And people get pretty sophisticated with a budget, web sites, apps, etc.  But its a very simple process, I like a yellow legal pad. Income at the top, list expenses one after the other, all the way to zero, every dollar of income has a place to go.  To keep track, when you spend something, note the amount spent, next to the budget line.  It's not even neat.  Scratchouts, different pens, can get ugly. But its just elementary math.

Something about writing it out, (with spousal discussion) seeing it every day on the refrigerator, helps encourage commitment to better financial choices.  You start asking yourself, "Is this latte/burger/gift/haircut going to break my budget?".

For most of us, me included, finance decisions are informed not by mostly math, if they were, we'd all be saving often and early--its mostly emotion--which isn't easy to change.  Small changes, made consistently, seem to be most effective.


mrigney

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Re: Case Study: I thought I was doing well....
« Reply #12 on: December 10, 2013, 08:44:14 AM »
@TLV. We might be able to do a little bit better w/the phone bill. We're w/TMobile (on a family plan w/2 other people who we split costs with). T-Mobile comes w/unlimited text/talk/data...there isn't another choice (it's 500 MB of high speed data, then unlimited at 2G speeds). The plan runs us $50/month, which I thought was pretty good. My wife's phone broke recently (screen busted, phone was 3 years old). We ended up getting her an iPhone 5C so she could Facetime w/her family (and I suppose prepaid might work even better now that she can use iMessage for most texts). The phone will run us $20/month for 24 months (or we can pay it off early).

I'd have to look at what tax bracket we fell in this year. The student loans are one of those gray things for me. At 2.75% I'd be better off paying down the 4% mortgage, even if there was no PMI as long as the value of the house wasn't falling, right?

So it seems to me the consensus right now is:
1) Get rid of the coffee habit. ($70 savings)
2) Get more granular with the misc category and try to cut $100+ there. ($100 savings)
3) Get food costs down. I'll make this a priority in January by keeping grocery receipts and seeing where we're spending the money. ($100 savings)
4) Get rid of cable (I'm surprised no one has facepunched me over this.) ($40 savings)
5) Stop spending money on haircuts. ($11 savings...my wife will still go get her hair cut somewhere)

That's $322/month in savings. That's $14k over the next 20 years.

Anyone have thoughts on the car? How have people w/two kids and a dog traveled in a sedan? Is it possible? Do people just not do it? Worth it to trade in my Sonata for a Prius and pay the $6k-ish so I can have 50k less miles and $5-600 less per year in gas costs?

@willn Appreciate the way you're doing it. I actually like the paper and pen idea in principal. Have been using YNAB since late last year which is why/how I was able to pull these numbers. You're right about it being mostly emotional. And a lot of not dialing it in for us has been laziness, I think. My wife is naturally more frugal than me. She does the grocery shopping and beats herself up over what she's spending. I probably than blow it by saying, "Look, if you want some ice cream, just get some ice cream...it's not going to break the budget." Even though ice cream at current prices will break the budget! The idea of having the budget visually on the 'fridge or someplace is good. I think I'm guilty of "forgetting" about the budget b/c it's on YNAB on the computer until I pull it up every week or every other week.

athomeintheworld

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Re: Case Study: I thought I was doing well....
« Reply #13 on: December 10, 2013, 08:47:02 AM »
Second the recommendation to eliminate PMI asap - will free up some $ for you

Clothing and kids clothing:  try thredup.com.  Have been using it for awhile and very happy.  We live in a warm climate but are spending a few weeks in a winter climate for the holidays.  I bought my 10mo daughter some "winter clothes" because we don't really have them at home, for just a fraction of what I would have spent even at Target/etc.  I have bought myself a few things too.

Books - I know in your case it doesn't add up to a lot.....but try using the library.  My library even has an app for my iPad and we download books for free.

Pets - not sure where you buy your pet food or if it's an option for you - but we switched to Costco grain free salmon and sweet potato food a little while ago.  Seems decent quality and is pretty inexpensive.

Coffee - buy a nice travel mug that you like and fits in your car/etc so you can cut down on coffee expenses without feeling deprived.

willn

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Re: Case Study: I thought I was doing well....
« Reply #14 on: December 10, 2013, 08:48:21 AM »

That's $322/month in savings. That's $14k over the next 20 years.


Only if your investment choices really, really suck ;)

(check math?)

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #15 on: December 10, 2013, 08:50:24 AM »
@willn Ha. Yeah. You think I would've caught that. How about $170k :-)

@zsmom Sounds like we're using the same dog food as you are (Nature's Domain? Something like $34/bag + tax).

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Re: Case Study: I thought I was doing well....
« Reply #17 on: December 10, 2013, 09:12:52 AM »
There are a lot of ways that you can trim your budget and make big savings.  Other posters have suggested some.  I'm just going to go through all of the areas that really stick out to me, showing you how if you cut down on monthly expenses it could help with your annual savings.

Groceries: Make this $400 a month.  You will save $200 a month, $2400 a year.
My family of 4 spends $550 a month currently so I don't mean to sound harsh, but we have two children that are eating a fairly large amount now, especially my 11 year old son.  I think that if you put your mind to it, you could make great changes here.

Restaurants: Maybe make this $75 a month.  Some might say eliminate it altogether, but since I enjoy eating too, I'm just going to suggest that you cut back.  Since it's really just you and your wife eating (you can make a sandwich and cut-up fruit and veggies for your toddler ahead of time), this is a fair amount.  Savings of about $60 a month.  $720 a year.

Coffee:  You've already acknowledged that this needs to go.  Savings of $83 a month.  $996 a year.

House Repair:  Will you need to continue spending $56 a month for this?  How about $25?  That's savings of $31 a month, $372 a year.

Getting rid of cable.  You've said you will do this after February.  I am guessing this is at least $30 a month.  Savings of $360 a year.

Miscellaneous.  Try to drop this down by $200 a month.  Savings of $2400 a year.

Fitness.  You've said that you averaged $68 a month but now it will be $10.  Savings of $696 a year.

Travel.  $45 a month.  Do you need to do this?  You say it is mostly for weddings.  If you didn't take these trips that would be annual savings of $540.  Do you think you could cut back on the amount of small trips possibly?

Coaching.  $75 a month.  This is a cost of $900 a year.  I don't know anything about the personal training business, but how long do you think you will need to continue paying for this service?

Vacation.  $111 a month.  Could you have staycations in the future or visit locations fairly nearby? If you would spend an average of $60 a month, you could save $612 for the year.

Gas.  Can you cut this by at least half to $115 a month?  If so, that would save you $1416 a year.

Cell phone.  Others have said you could save $30 a month.  $360 a year.

When subtracting your expenses from your net income, I came about $115 short.  That's $1380 for the year.  I am too lazy to double check. :P  But you might want to look into that.

I am not really familiar with PMI, but I agree with others that it would be nice to be rid of it soon.

(Just saw that others have posted recently.  If I repeated any of what they said, I'm sorry about that.)
« Last Edit: December 10, 2013, 09:54:27 AM by avonlea »

athomeintheworld

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Re: Case Study: I thought I was doing well....
« Reply #18 on: December 10, 2013, 09:40:41 AM »
Regarding food budget - does not need to increase much after your new baby!  Hopefully mom is breastfeeding? If you can skip the formula you save not only $ but your baby's gut health too:)  And hopefully avoid buying rice cereal, baby food etc and give baby some small amounts of "real food" when it's time. 

Have you considered cloth diapering the new one?  Significantly cheaper.  And more eco friendly/etc:)

And yes thats our dog food :)

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #19 on: December 10, 2013, 09:44:47 AM »
@zsmom Yes to all. Breastfeeding. First one didn't eat any cereal or solids until 6 months. Yes to cloth diapering, too. We've finally gotten out of diapers with the toddler (although we've broken down and gone w/disposable pull-ups at night) only to start over again.

SwordGuy

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Re: Case Study: I thought I was doing well....
« Reply #20 on: December 10, 2013, 10:18:17 AM »
There are a lot of ways that you can trim your budget and make big savings.  Other posters have suggested some.  I'm just going to go through all of the areas that really stick out to me, showing you how if you cut down on monthly expenses it could help with your annual savings.

Groceries: Make this $400 a month.  You will save $200 a month, $2400 a year.
My family of 4 spends $550 a month currently so I don't mean to sound harsh, but we have two children that are eating a fairly large amount now, especially my 11 year old son.  I think that if you put your mind to it, you could make great changes here.

Restaurants: Maybe make this $75 a month.  Some might say eliminate it altogether, but since I enjoy eating too, I'm just going to suggest that you cut back.  Since it's really just you and your wife eating (you can make a sandwich and cut-up fruit and veggies for your toddler ahead of time), this is a fair amount.  Savings of about $60 a month.  $720 a year.

Coffee:  You've already acknowledged that this needs to go.  Savings of $83 a month.  $996 a year.

House Repair:  Will you need to continue spending $56 a month for this?  How about $25?  That's savings of $31 a month, $372 a year.

Getting rid of cable.  You've said you will do this after February.  I am guessing this is at least $30 a month.  Savings of $360 a year.

Miscellaneous.  Try to drop this down by $200 a month.  Savings of $2400 a year.

Fitness.  You've said that you averaged $68 a month but now it will be $10.  Savings of $696 a year.

Travel.  $45 a month.  Do you need to do this?  You say it is mostly for weddings.  If you didn't take these trips that would be annual savings of $540.  Do you think you could cut back on the amount of small trips possibly?

Coaching.  $75 a month.  This is a cost of $900 a year.  I don't know anything about the personal training business, but how long do you think you will need to continue paying for this service?

Vacation.  $111 a month.  Could you have staycations in the future or visit locations fairly nearby? If you would spend an average of $60 a month, you could save $612 for the year.

Gas.  Can you cut this by at least half to $115 a month?  If so, that would save you $1416 a year.

Cell phone.  Others have said you could save $30 a month.  $360 a year.

When subtracting your expenses from your net income, I came about $115 short.  That's $1380 for the year.  I am too lazy to double check. :P  But you might want to look into that.

I am not really familiar with PMI, but I agree with others that it would be nice to be rid of it soon.

(Just saw that others have posted recently.  If I repeated any of what they said, I'm sorry about that.)

That's a grand total of - drum roll please - $13,152 per year.

You're max 2 years from ditching the PMI.   You'll blink and it will be done.

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #21 on: December 10, 2013, 10:42:09 AM »
@avonlea Thanks for delving into some specifics.

Re: groceries. $400 is actually what we shoot for, and I'd say the last half of last year and first quarter of this year we were $400-450....it's then crept up. Some of it is moving from a no sales tax on grocery state to one where it's 9% (that adds $40 or so). We're not sure about the rest. We need to hammer this down.

Restaurants: $75 sounds reasonable to me. We've been shooting for $100, and probably were under that 10 out of 12 months. Moving from TX back to Alabama in February we went way over. Then went way over again in August when we moved from an apartment back into our house.

House Repair: Doubt I'll have to spend $50/month in the short term. To some extent, though, I feel the need to set aside money for future repairs. Is that unreasonable? The rule of thumb I normally hear is 0.5-1.0% the value of the house in repairs/year.

Misc: This is obviously where we need to focus.

Fitness: Yeah, I won't spend $700. I budget $10-15/month + get $40 from the guys using my gym. That is/should be enough to cover all gym expenses (maintaining equipment, improving equipment, etc).

Travel: I was a groomsman in the wedding, had to fly cross country plus hotel, so all that spending was basically on one trip. All of my close friends are married now, so hoping that line item goes away for 2014.

Coaching: Yeah...this could be cut...this is the one luxury that I think I'd keep if I'm cutting. I view it as "professional development" if I want to develop the personal training side hustle. A coach is invaluable both to get me to peak fitness and as a professional mentor. But I understand why this looks frivolous.

Gas: Hard to cut this in half, I think. I commute 25 miles round trip each day. That's $3/day; $65/month. We might be able to cut this significantly. I'll see what I can do.

So yeah...I completely get where you're coming from on almost all this and am in agreement. Time to get the axe honed to chop all this stuff out. Even if we cut 2/3 of what you have listed above, PMI would be gone in 2 years.

Quote
There are a lot of ways that you can trim your budget and make big savings.  Other posters have suggested some.  I'm just going to go through all of the areas that really stick out to me, showing you how if you cut down on monthly expenses it could help with your annual savings.

Groceries: Make this $400 a month.  You will save $200 a month, $2400 a year.
My family of 4 spends $550 a month currently so I don't mean to sound harsh, but we have two children that are eating a fairly large amount now, especially my 11 year old son.  I think that if you put your mind to it, you could make great changes here.

Restaurants: Maybe make this $75 a month.  Some might say eliminate it altogether, but since I enjoy eating too, I'm just going to suggest that you cut back.  Since it's really just you and your wife eating (you can make a sandwich and cut-up fruit and veggies for your toddler ahead of time), this is a fair amount.  Savings of about $60 a month.  $720 a year.

Coffee:  You've already acknowledged that this needs to go.  Savings of $83 a month.  $996 a year.

House Repair:  Will you need to continue spending $56 a month for this?  How about $25?  That's savings of $31 a month, $372 a year.

Getting rid of cable.  You've said you will do this after February.  I am guessing this is at least $30 a month.  Savings of $360 a year.

Miscellaneous.  Try to drop this down by $200 a month.  Savings of $2400 a year.

Fitness.  You've said that you averaged $68 a month but now it will be $10.  Savings of $696 a year.

Travel.  $45 a month.  Do you need to do this?  You say it is mostly for weddings.  If you didn't take these trips that would be annual savings of $540.  Do you think you could cut back on the amount of small trips possibly?

Coaching.  $75 a month.  This is a cost of $900 a year.  I don't know anything about the personal training business, but how long do you think you will need to continue paying for this service?

Vacation.  $111 a month.  Could you have staycations in the future or visit locations fairly nearby? If you would spend an average of $60 a month, you could save $612 for the year.

Gas.  Can you cut this by at least half to $115 a month?  If so, that would save you $1416 a year.

Cell phone.  Others have said you could save $30 a month.  $360 a year.

When subtracting your expenses from your net income, I came about $115 short.  That's $1380 for the year.  I am too lazy to double check. :P  But you might want to look into that.

I am not really familiar with PMI, but I agree with others that it would be nice to be rid of it soon.

(Just saw that others have posted recently.  If I repeated any of what they said, I'm sorry about that.)

avonlea

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Re: Case Study: I thought I was doing well....
« Reply #22 on: December 10, 2013, 11:17:23 AM »
House Repair: Doubt I'll have to spend $50/month in the short term. To some extent, though, I feel the need to set aside money for future repairs. Is that unreasonable? The rule of thumb I normally hear is 0.5-1.0% the value of the house in repairs/year.
No, I don't think that is unreasonable.  Our current house was new construction when we bought it, so we haven't really had to deal with repair expenses very much.  You make a lot of sense with what you have shared.  My husband and I have been setting aside money for future repairs as well, but I count it as savings (until we actually spend it, then I'll probably cry. lol)

When I am in "numbers mode", my personality tends to fly out the window.  I didn't mean to come off as being really judgmental in my first post.  Seriously, there are several unnecessary expenses in my own family's budget, too.  I think the key is to just realize that every dollar is a choice.  If we spend on something now, that means putting off FI to a later date.  Each person/family has to decide what their own personal time frame is for hitting FI and the amount of sacrifice they are willing to make in order to attain that goal.  Obviously, having your wife stay at home with the kids is more important to your family than retiring as early as possible.  Same for ours.  And some expenditures we make now because we don't think it's worth cutting them out of our lives in order to hit FIRE 3, 5, or 7 years earlier (or whatever number).  That's fine.  In my first post, I was just trying to show ways that you probably could cut back.  You and your wife are in the driver's seat when it comes to those decisions, though. ;)

bogart

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Re: Case Study: I thought I was doing well....
« Reply #23 on: December 10, 2013, 12:17:21 PM »
@mrigney you won't get any grief from me about the dog, but you're the one asking for ways to lower costs. 

I don't know what you mean by "big," but my "big" dogs are around 60# and very shaggy, and we've had allergy issues this year ourselves, so I empathize.

I'm surprised, actually, that those cars work for you at all (with the dog).  I'm a hatchback gal, myself.  But, whatever.  The value of automobiles as a way to transport pets does seem to be lost on MMM himself, oh well.  That said, could you take public transport to work one or two days a week (and would doing so save any $$$)?  Just a thought. 

As for --
Quote
Anyone have a different take? Cheaper way to get heartworm meds for a big dog? What do you pay for a vet checkup plus annual shots?
, well, it will scandalize some, but I give my dogs' shots myself (except rabies, but that's once every 3 years) having bought them at the farm supply store, or drsfostersmith.com.  I don't usually do annual physicals at all, though as they get older I may (they are now 9 and 10, so at the age when problems that might benefit from detection/treatment often start emerging in my experience).  I use cow wormer (farm supply store, active ingredient Ivermectin) for heartworm protection -- it's absurdly cheap, available OTC, and avoids the need for annual retests of heartworm status that are otherwise required here (silly if I keep the dogs on meds year-round, as I do).  A word of caution:  some (many?) vets will not allow/support you in doing this (e.g. will deny the animal care unless you follow their preventive maintenance schedule, won't give advice on dosing with cow wormer).  One reason I stick with my vets is that they do, but you'll want to talk to your own if you have any interest in taking this on, and you may not.  Still, it is an option.

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #24 on: December 10, 2013, 12:51:44 PM »
@bogart The cars work for now w/one kid and one dog w/o a whole lot of issues. Car seat behind passenger, dog behind driver (and "big" is 65# or so...a lab). Add the second carseat, though, and even getting both kids and the dog in there is pretty challenging (or so we think...we're going to throw the second carseat in there this week and just see what it's like) or impossible. Trying to be as mustachian as we can w/o torturing ourselves:-)

Thanks for all the ideas re: pet care. I'm not opposed to giving shots. I gave allergy shots for a while back in my less-mustachian days ($75/month). I have plenty of friends who are doctors who could teach me how to give a shot (not a vet, I know, but still). Appreciate the links.

reginna

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Re: Case Study: I thought I was doing well....
« Reply #25 on: December 10, 2013, 01:15:52 PM »
Second the grain free dog food. After years of treating the scratchy, flaking skin and raw spots on our dog we did a food elimination diet suggested by the vet. Turns our she is allergic to beef?? Vet recommended fish/ sweet potato based food, no grains. Dog is happy. No vet trips and the fur has grown back in the bald spots she had chewed. Don't know if that will help you but maybe it's something to think about.

BoulderTC

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Re: Case Study: I thought I was doing well....
« Reply #26 on: December 10, 2013, 01:19:44 PM »
I have a suggestion for a side hustle if you're open to it. My husband and I are both engineers and we have a ACT math/science tutoring side business. As soon as we say we're practicing engineers and the schools we went to, people trust that we know some math. It's ideal to tutor for standardized tests because a) people are willing to pay the one time cost in order to potentially save thousands on college tuition through scholarships, b) the amount of material covered in the ACT is actually not very much for people who are math/science savvy so it reduces the scope of what you need to know going in, and c) it's busy at concentrated times with clear end dates, so its not super overwhelming. Our business is currently based entirely off referrals/networking which can be very powerful.

I know this isn't for everyone, but we've had good luck charging about $55 per hour and add an additional $10 per session if the client requires us to travel more than a few miles. We've also partnered with someone who specializes in reading/english and test taking tactics to offer the complete package. Maybe your wife would fit that bill and you could go into business with her?

 

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #27 on: December 10, 2013, 01:34:03 PM »
@BoulderTC I've thought about this many times. I've done some GRE tutoring before, but not any ACT/SAT tutoring. I have the creds (near perfect ACT/SAT scores, National Merit Scholar, some teaching experience, physics degree from a top 20 university), but not sure how you get my name into the right peoples' hands to start? Did you advertise on craigslist? Flyers? Connect with the local high schools? Once you have some clients the word of mouth thing becomes easier...how did you land your first few is my question. Would be highly interested in this.

We have excellent high schools here that are highly competitive. Not sure if that would help or hurt business. But yeah, that's right up my alley.

bogart

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Re: Case Study: I thought I was doing well....
« Reply #28 on: December 10, 2013, 01:39:17 PM »
Second the grain free dog food. After years of treating the scratchy, flaking skin and raw spots on our dog we did a food elimination diet suggested by the vet. Turns our she is allergic to beef?? Vet recommended fish/ sweet potato based food, no grains. Dog is happy. No vet trips and the fur has grown back in the bald spots she had chewed. Don't know if that will help you but maybe it's something to think about.

Obscure (but possibly useful) link to weird mammalian-meat allergy caused by a reaction tick bites (no, really) and affecting dogs as well as people:  http://online.wsj.com/news/articles/SB10001424127887324634304578537203916053308 .  Who knew?  I don't think there's really any actionable info. there, but it might explain what's going on with your dog.

OP -- dog shots are easy (assume a cooperative dog!); they're just sub-Q and of course it's at most (depending on what your vet recommends) annual.  Haha, that car arrangement would not work well with my dogs (+ kid), but, my dogs aren't your dog:  no worries, and good luck!

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Re: Case Study: I thought I was doing well....
« Reply #29 on: December 10, 2013, 02:09:42 PM »
I feed my dog grain free for ~35 bucks a month (4health brand from Tractor Supply, and I also can always find bag that is damaged and get them to discount it), and she's the same size as yours is. This also reduces vet trips/expenses. 65lbs is firmly in the 'medium dog' category, by the way.

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Re: Case Study: I thought I was doing well....
« Reply #30 on: December 10, 2013, 02:47:45 PM »
Re:  the dog and cars.  Is it absolutely necessary to take the dog with you when you take those long trips?  If you could find another family with a big dog to swap dog sitting duties with, or a teenager who lives near you who would be willing to dogsit for a reasonable fee, there would be no need for a bigger car.  The other option would be to rent a larger car for those trips.  Probably would work out to costing less than upgrading to a Prius.  That sounds more like a want than a need to me.

Re:  your current job situation, I'm puzzled.  You say:

Took my current job about a year ago. Just a super market right now. I'm currently in talks with another company about a position which I hope will include a raise. Reality, though, is that even in my mid-sized, high-tech, engineering focused city, I'd say the average salary is 80-95k. And in 6-8 years if I stayed w/my current job, I suspect I'd be somewhere in that range. Cost of living here is low, so salaries are similarly depressed compared to other places in the country. I'll continue to look for ways (jobs) to up this b/c you're right...you can only do so much on one salary at $61k.


Unless what you mean is that you are working in a supermarket, I don't understand why you are settling for 61k when the average salary in your area is 80-95k.  Ok, yes, I realize that may be for people with more experience than you, but this is MMM land.  Are you 20k less than average?  Why are you poking along at the bottom of the market?   Your hair is on fire with that PMI business and you need to get your income up!  Stop settling for less than average, in yourself and in your employer.  Get serious about the job hunt.  Read some books on negotiation --  there will be lots at the library (my personal favorite is "Ask For It".  "Getting More" also has some good suggestions).  Bust your butt a bit at work and be more aggressive about asking for raises, bonuses and promotions.  Make yourself invaluable.  Become the person they turn to to solve problems.   It works, and if your current employer doesn't appreciate it and raise your compensation appropriately, find one that will. 

Re:  Side hustles.  The home gym sounds like a great option.  Can you increase the number of people who are using it? The added benefit is that some of those people might eventually become clients.  Another option would be to explore your interest in ministerial support as a side hustle.  Not sure what you did, but listening to Dave Ramsey he often comments that people who serve as youth pastors, etc. often have to do it as a side hustle because it is hard to get support for full time work in that field.  So could you possible find a church where you could help with their youth activities or something? 

Coffee buying on the way to work has to stop NOW.  That is a bad habit and totally unnecessary.  Change your route to work for a bit if necessary to break the habit.  Read some of Charles Duhigg's stuff about habits so that you understand better how your brain works and how to retrain it.

Tracking groceries in detail -- excellent idea.   I did this way back when we first started tracking expenses after reading Your Money or Your Life and was shocked to see that somethign like 30-40% of our grocery spending was going to snacks and alcohol.  EEEK!  Kind of offset the daily trips to the gym in a negative way, as well as being a huge financial drain.  Another great thing to do with groceries is to keep a price book.  It allows you to figure out how cyclical sales work in your market, so you can pretty accurately predict when certain things are going to go on sale, and then stock up accordingly.   If you are buying half hogs you probably have a freezer already, so should be able to do a lot of stocking up. 

Haircuts.  How often are these really needed?  Would a change of hairstyle help reduce the expense?  I have curly hair and keep it really short, which means I can go about 3 months between cuts.  If your wife can keep her hair longer and reduce the frequency of cuts, that might help.  You might want to try having her trim your hair with hair clippers -- pretty easy to learn.

Overall I think you have the right attitude to get this under control and start making some real progress.  Good luck and keep us posted about how it is going!

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #31 on: December 10, 2013, 02:52:50 PM »
@lhamo That was supposed to say "less than super job market." Oops. I'm in a city that is pretty heavily influenced by defense spending. Overall the economy is fine, unemployment low, no layoffs, but there's a lot of uncertainty in the defense world right now, so no one is hiring. When I came back from ministry work kind of had to take what I could get. But yeah, I get your point...that's the main reason I'm entertaining this other company.

Jack

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Re: Case Study: I thought I was doing well....
« Reply #32 on: December 10, 2013, 08:43:02 PM »
Everybody assumes all engineering is ultra-lucrative, but it isn't necessarily. My previous job was as a transportation (civil) engineer (in training) and paid $45k. It had taken me about 2 years to find. And then 6 months ago I got laid off because the company didn't have enough contracts coming in!

After 2 months with essentially no leads on civil engineering jobs, I finally got fed up and changed my resume to emphasize my computer science skills (I had double-majored -- if I hadn't, I'd be screwed). Suddenly, recruiters started calling me and now I'm making $65K as an entry-level computer programmer. But I had to completely switch from one engineering field to another to get paid what an engineer "ought" to get paid.

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Re: Case Study: I thought I was doing well....
« Reply #33 on: December 10, 2013, 08:48:30 PM »
You can get some grocery cost-slashing inspiration from moneysavingmom.com, the Prudent Homemaker blog, and also the Tightwad Gazette book series. Everyone else has already said the advice I would give. I agree with the advice to pare down to most economical car you could use on a normal basis and then rent a car for special trips with the family and big dog.

CDP45

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Re: Case Study: I thought I was doing well....
« Reply #34 on: December 10, 2013, 09:52:22 PM »
Can your wife do some tutoring or watching other kids? What does she do all day when you're at work?

athomeintheworld

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Re: Case Study: I thought I was doing well....
« Reply #35 on: December 11, 2013, 09:36:08 AM »
Can your wife do some tutoring or watching other kids? What does she do all day when you're at work?

They have a 2 yr old and she is pregnant due in February - that's what she "does" all day!  :)

BoulderTC

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Re: Case Study: I thought I was doing well....
« Reply #36 on: December 11, 2013, 09:58:36 AM »
@BoulderTC I've thought about this many times. I've done some GRE tutoring before, but not any ACT/SAT tutoring. I have the creds (near perfect ACT/SAT scores, National Merit Scholar, some teaching experience, physics degree from a top 20 university), but not sure how you get my name into the right peoples' hands to start? Did you advertise on craigslist? Flyers? Connect with the local high schools? Once you have some clients the word of mouth thing becomes easier...how did you land your first few is my question. Would be highly interested in this.

We have excellent high schools here that are highly competitive. Not sure if that would help or hurt business. But yeah, that's right up my alley.

Sorry I didn't check back here sooner to answer this! We started out by posting ads on craigslist, at our local gym, our church, on social media, etc. We never needed to go to the local high school although I think that would have been our next stop. Once we found someone else on CL that was advertising her specialty was reading/english, we met up and decided to tag team. It was really easy to start and it has nearly no overhead. We made it look professional by having a nice looking price sheet and we went to our first few clients with a real plan of attack to make it look like we'd been doing it a lot already. We just continually check out ACT study books from the library to get ideas of what to teach. Your credentials are very similar to my husband's, so I'd say you have a decent shot at making it work if you're interested. Good luck!

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Re: Case Study: I thought I was doing well....
« Reply #37 on: December 11, 2013, 10:02:37 AM »
I've done some GRE tutoring before, but not any ACT/SAT tutoring.  Would be highly interested in this.

We have excellent high schools here that are highly competitive. Not sure if that would help or hurt business. But yeah, that's right up my alley.

+1   The parents at those high schools will be all over you like white on rice (the kids will be hit or miss, of course).  Once your name gets out, it will be a tsunami.  Brace yourself.

Thisisme

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Re: Case Study: I thought I was doing well....
« Reply #38 on: December 11, 2013, 10:54:07 AM »

@willn Appreciate the way you're doing it. I actually like the paper and pen idea in principal. Have been using YNAB since late last year which is why/how I was able to pull these numbers. You're right about it being mostly emotional. And a lot of not dialing it in for us has been laziness, I think. My wife is naturally more frugal than me. She does the grocery shopping and beats herself up over what she's spending. I probably than blow it by saying, "Look, if you want some ice cream, just get some ice cream...it's not going to break the budget." Even though ice cream at current prices will break the budget! The idea of having the budget visually on the 'fridge or someplace is good. I think I'm guilty of "forgetting" about the budget b/c it's on YNAB on the computer until I pull it up every week or every other week.

This jumped out at me.  The real power of YNAB (or any budget) is up to date information.  If you have/are keeping a smart phone with YNAB access, download the phone client.  If you don't have the phone access, train yourself to check important, changeable budget numbers more than you are now.  Write down the numbers if necessary, and really get them in your face so you have current information on how reachable your goals are.

Dicey

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Re: Case Study: I thought I was doing well....
« Reply #39 on: December 11, 2013, 12:23:27 PM »
At 2.75% I'd be better off paying down the 4% mortgage, even if there was no PMI as long as the value of the house wasn't falling, right?

Don't think I agree with this. If real estate prices are rising in your area, the PMI will eventually take care of itself, possibly with a little help from you after you clean up your budget. I'd pay off the student loans first because they are for a non-appreciating asset (unlike real estate, in most cases). Who wants to drag around student loans forever? Once you adjust to your new lifestyle and have paid off your student loans, you can evaluate what it will take to kill the PMI. Let's say that takes a year. By then, rising Real Estate values could make the PMI payoff comparatively miniscule. If you pay off the PMI now, you will still have the student loans to pay off, plus whatever interest has accrued.

Disclaimer the first: If RE prices are stagnant in your area, please disregard the above.

Disclaimer the second: PMI is not necessarily a bad thing. It's insurance that allowed you to buy a home (an historically appreciating asset) that you could not have purchased otherwise. I had PMI on my first house. The appreciation on the house far surpassed what I paid in PMI. I own my current home free and clear, but it never would have happened if I hadn't bought that first house with the help of PMI.

mrigney

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Re: Case Study: I thought I was doing well....
« Reply #40 on: December 11, 2013, 04:26:20 PM »
@BoulderTC I think I'm going to run with the tutoring idea and see what happens. Low risk, potentially big reward. Heck, I can make more per hour tutoring than I can at my day job.

@DianeC Housing market in my area is basically flat and has been for the last 3-4 years. Interesting that you say knock out the student loans. I'm generally low interest debt averse, but figured most people would be for stringing out the student loans since they're at such a low rate. I understand where you're coming from, though! My note on PMI, though. I understand why it's there. Think it's stupid, though, that it's based only on equity instead of some sliding scale based on equity and credit score. Why should a trust fund baby with a 600 credit score have zero PMI and me with a score of 765 but only 5% equity pay $105/month for years. Isn't he more likely to default and leave the bank in a bad spot? I digress, though:-)

@Mom To 5 the teacher retirement money is actually mine from who I worked for the local university.

Dicey

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Re: Case Study: I thought I was doing well....
« Reply #41 on: December 17, 2013, 11:04:38 AM »

My note on PMI, though. I understand why it's there. Think it's stupid, though, that it's based only on equity instead of some sliding scale based on equity and credit score. Why should a trust fund baby with a 600 credit score have zero PMI and me with a score of 765 but only 5% equity pay $105/month for years. Isn't he more likely to default and leave the bank in a bad spot? I digress, though:-)


That's kind of my point on PMI. People accept it because they want to buy a house with less 20% down. Then they want to change the rules. Your example underscores this point. You didn't think it was "stupid" when it let you buy the house you wanted.