Author Topic: Case Study: Large Rural family  (Read 4802 times)

Wndwmn

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Case Study: Large Rural family
« on: December 31, 2015, 05:24:09 AM »
So it's the new year and I hope to take a fresh look at our finances and see what we can do to cut costs.

Regular Income:  3200 net/month.  This is after health insurance and 5% contribution to TSP (with 5% match)

Irregular Income:  I work for a scoring company for probably 3 mos out of the year and probably earn about $3000 a year.  We also had a farmer's market stand last year and grossed around $3500. A lot of that went to pay for baby pigs and feed for pigs which we only have March-August.  Husband also cut 2 extra lawns last summer.  He bought a new lawnmower to cut them so really there was no net income there but could be this year.

Budget:

Housing:  $575 mortgage ($50 is extra principle)+80 insurance+$70 taxes=$725

Transportation:  $480 gas (45 mile commute for DH)+$150 insurance+$20 title +15 oil change=$665

Farm expenses:  $150 feed+ $200 farm related (tax deductible, but definitely add up.  For example, we currently need new tractor tires)=$350

Charitable giving:  $350 (we aim for around 10% of our income)

Groceries:  $280 (Feeding 2 adults and 5 children from 17 down to 3, but also have a garden and home grown meat and venison)

Utilities: $300 electric+$70 internet+$120 cell phone=$490.  This is an area I would like to cut, but am not sure where to start.

Gym Membership:  $50 (includes Tae Kwon Do for 4 children and 1 stressed mother :)

Miscellaneous:  This is around $200 and includes things like postage, life insurance, clothing, gifts, home repair and eating out.

Education:  This is not a regular expense, but I usually pay this out of my part time income.  We probably pay about $1500 a year to homeschool our 4 children.  I reuse as much as possible, but the two older children take an outside (paid) class.  We also have to buy some books and pay for testing at the end of the year.

Assets:  House ($290,000) + retirement ($80,000)=$370,000

Liabilities:  Mortgage ($109,000) + credit card ($3000) =$112,000

Net Worth:  $258,000

We look pretty good on paper, but we are always short on cash and always feeling pressured to spend more.  One big step I want to take is to sell one of our cars.  We have 4.  Even with teens, we just can't afford that many.

Any suggestions? 


thedayisbrave

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Re: Case Study: Large Rural family
« Reply #1 on: December 31, 2015, 06:48:53 AM »
Your husband's commute is killing you.  Any way to negotiate a work from home situation, even if its 1 or 2 days a week? Can he carpool with someone? Get a new job?

The cell phone is high too, if it's only for one phone (you mentioned teenagers, so not sure if you're paying for multiple).  I use Republic Wireless and my average bill is $18/mo, for unlimited text/talk and all the data I ever use (about 500MB).  The quality is crappy sometimes, but I can live with it for the massive savings.  I prefer to do things by email/text anyway.

Can the 17 year old get a part-time job and contribute? Make it part of their "education"? I started working on a farm at age 10... I suppose that wasn't legal, but I wanted a horse and the only way I could have one was if I paid for her upkeep myself...

Good job on the groceries :)

aj_yooper

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Re: Case Study: Large Rural family
« Reply #2 on: December 31, 2015, 07:24:48 AM »
Welcome to the forum!

You are doing great on the overall budget and the food budget, pretty impressive to home school your kids, and keep a farm going!  Smart too in getting the match for husband's TSP. 

1.  I would consider not paying extra on the mortgage and putting that $50/month in short term reserves to allow for easier cash flow (tractor tires, etc.).  I know it feels good to shorten the term of the mortgage, but that can be deferred now.
2.  $3000 on a credit card could be a tell that cash flow is an issue.  If it is costing interest, get rid of the balance asap. 
3.  Electric is high, but you probably use it for the farm too.  I would start out by getting the family on board to lower electric costs by turning off lights, unplugging vampires, using led or cfl s, turning off the internet at night, etc.

Hope this helps.
 

Apples

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Re: Case Study: Large Rural family
« Reply #3 on: December 31, 2015, 07:26:22 AM »
I suggest the teens get part time jobs and pay for their own cars/car insurance/cell phones.  If you're home schooling, they probably spend less time actually in "class" learning than teens at a normal school and have time to work day hours instead of night shift if jobs are scarce.  My friends and I all worked part time throughout the school year in addition to school activities, and all summer.  (And I'm only in my 20's, so this isn't some "back in my day..." thing!)  I figure $200 or $250/month would cover all of their car/phone/insurance expenses and that can be accomplished though 10 hours of work a week.  If they get that up to 15 hours or make more $/hr, they can even get some spending money! Woohoo!

How fuel efficient is your DH's car? That gas bill is large.  However, it will depend on how expensive a replacement vehicle would be if it's worth changing vehicles.  I live in a rural area and I know sometimes the used car market can still be pretty expensive.

Really, it seems like you guys are killing it on that income with 4 kids.  Depending on where you live that $300 electric might even already be Mustachian in a Minnesota winter, unless you have wood heat.  Of course your biggest money saver will be your kids growing up and moving out :p

sweettea

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Re: Case Study: Large Rural family
« Reply #4 on: December 31, 2015, 07:46:47 AM »
Is it morally permissible for you to trade some of your money donations for some donations of farm products? How about donations of venison (for instance http://www.dnr.state.mn.us/hunting/deer/donation/index.html)? I would argue that it's better stewardship to pay off interest-bearing credit cards quickly than to keep 10% charititable giving on all occasions: you can always give more to average to 10% later, but the interest you pay can never be gotten back.

Have you tried scaling up your farm production, since you have 5 children to help? How about the lawnmowing business? Can you recruit some child labor and take up a snowshoveling business?

Do you need a tractor? There are a lot of books these days about how to make a living from farming without heavy machinery, and if you were able to pull off getting rid of the tractor, that would get rid of that maintenance bill and the depreciation. I'd guess you're in an area with other farms; perhaps you could rent one when you need it? Growing up, my family had a tractor and 22 acres, and the tractor was used about twice a year to bushhog and once a year to till the garden, resulting in a perpetual money sink.

Your grocery bill is ridiculously awesome.

Your charitable giving, being 10% of your gross income (from what I can tell), is ridiculously awesome.

onlykelsey

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Re: Case Study: Large Rural family
« Reply #5 on: December 31, 2015, 07:52:49 AM »
I'd second everyone's suggestions about older kids getting jobs, even if it's just snow shoveling or seasonal.  Are you both paying for them to have a car, and for insurance and gas?  That seems crazy to me (also in my 20s, so not a "back in my day" thing like Apples mentioned). 

It seems like a job would also be a good way to teach your kids about budgeting (including tithing and saving for the future).  My mom never told me what to do (or not do) with my money, but once I hit 13 or 14 I was expected to pay for my own social life, school lunch, eventual insurance/gas/car money, etc, and I think most able-bodied kids should be able to do the same.  MMM has a good post somewhere on why he disagrees with the "your job is to do well at school" approach, and I think it's well thought out. 

Jacana

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Re: Case Study: Large Rural family
« Reply #6 on: December 31, 2015, 07:54:05 AM »
Are you sure about that fuel cost? I'm not sure it is your husbands commute that is the main problem there. You are using on average 240 gallons of fuel a month? That is assuming it is about $2/gallon where you are (its under that here and we are in an expensive area).

Your husband drives ~1800 miles a month to get to work and back home (45*2*20 days a month). Yes, that is a lot. But if that 240 gal were entirely his (silly I know, just an extreme example) then his commuting vehicle would be getting 7.5 mpg. I really hope that isn't the case. If he were using a good commuting vehicle getting 30 mpg, his share would be 60 gallons. If his car were getting 20 mpg, his share would be 90 gallons. Etc. That leaves 150-180 gallons a month unaccounted for? Someone else please check my math and logic.

So then the question is where are the remaining gallons going and why? If his commuting car gets really poor mpg, have him take the best mpg of your 4 cars or something. If it is your teens driving too much, make them responsible for some or all of their costs with a job or chores or something. If it is the farm vehicles, add that to your business expenses and deduct from taxes? If it is your driving, see what you yourself can do to cut back. And look into selling a car or two like you mentioned. I don't know all the details or what cars you drive or anything else but it seems like a good place to start looking.

merula

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Re: Case Study: Large Rural family
« Reply #7 on: December 31, 2015, 07:55:42 AM »
Question on the insurance paid with your mortgage: Is that private mortgage insurance (PMI), or homeowners insurance bundled with your payment? If it's PMI, are you at a place where you can drop it? If you are, do it, even if it means paying for an appraisal. If you're close, it could make sense to continue paying extra on the mortgage until the PMI is gone.

If that's homeowners, I think you need to shop around because that's crazy high. Unless maybe it's a farm policy? I don't have a lot of experience with those.

Is the life insurance "whole"/"universal" or "term"? I'd really suggest going with term, for a variety of reasons that have been hashed out over and over on this board, including here: http://forum.mrmoneymustache.com/investor-alley/why-whole-life-universal-life-insurance-is-a-bad-idea

I totally agree with the idea to sell at least one car. If your kids want/need one, they should pay for it. Maybe you could sell it to your kid(s)? I'm imagining a "Bank Of Mom And Dad" car loan with a down payment and 36-month term. Loan could include insurance costs, too.

I agree with Apples that older kids should have a job. I started babysitting at 12 and got a part-time job when I was 15, and I'm 30 now, so I'm not too far out of touch...I hope. I wouldn't make them pay into the household finances, but they should pay for their own phones, transportation and extras.

One thing I've heard of people doing with older kids is giving the kids an incentive to lower the electric bill. You tell them "Jan 2015 our electric bill was $X. We can lower that by turning off lights and electronics when we're not using them. If Jan 2016's usage is lower, I'll split the savings with you." This may not work as well if more energy is being used for farm purposes.

Overall, though, I think you're doing great for raising 4 kids on that salary.

former player

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Re: Case Study: Large Rural family
« Reply #8 on: December 31, 2015, 08:08:43 AM »
I've added up what you say you spend each month (averaging the education expenses) and get to approximately $2,700.  On a net income of 3,200 you have some leakage going on.

I would start by separating out your income and expenditure for farming, lawnmowing and household.  My concern here is that you are mentioning paying out quite big sums on the farm and lawnmowing with no indication of the return on investment.  You need to know either that the farming and lawnmowing are making a decent return on investment or that you understand the losses (for the farming) and are prepared to live with them for the other benefits it brings.  Given the seasonal nature of the farming and lawnmowing, it would help to go back over the last summer season's costs and income so that you understand fully what is going on.  For the household expenditure, last month, this month and next month should give you a good indication of what is happening.  There are probably some holes you haven't mentioned in your post - for instance, what about maintenance (other than oil changes) on all those cars?

Whoever in your household is doing the most driving should be using the most fuel-efficient car.

Electric and cell phones seem high, which may be usage and is also about checking for cheaper suppliers.  Have you called around for cheaper car insurance?

SomedayStache

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Re: Case Study: Large Rural family
« Reply #9 on: December 31, 2015, 08:17:07 AM »
Following. 

That grocery bill kicks butt!

Wndwmn

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Re: Case Study: Large Rural family
« Reply #10 on: December 31, 2015, 11:34:19 AM »
Thanks for the kind words and encouragement.  I'll try to sort out the questions as best as I can.

Commute/Gas:  My husband is an equipment operator so he can't work from home, but he has switched to every other Friday off.  I suspect that not everything he gets from the gas station is actually gas (coffees, snacks, etc.)  We also drive to church 2-3 times a week, drive kids to Tae Kwon Do, football practice in the fall.  We live on a major 4 lane highway.  Thankfully not too far from town (7 miles) but it still all adds up.

Teens/Kids:  Neither have a cell phone or a license.  My daughter recently got a part time job in town, but that means I am also driving her there several times a week as well.  All the kids have farm chores and the older ones help my husband with the lawn business.  He pays them to do the weedeating/push mowing.  The older two buy their own clothes, pay for their own entertainment.  The younger ones get hand me downs or thrift store clothes :).

Insurance:  We have term life insurance.  I think that the car insurance is so high because we have 4 vehicles.  We do have full coverage on two of them, so if we have a good amount of savings we could drop that, but we don't.  $1000 deductible on car and house insurance.  The house insurance does also cover a rider for the farm in case anyone would get hurt on the farm or sick through something that was sold to them from the farmer's market. 

Phone:  We have Verizon and for 2 devices for 3 Gigabytes of data it is $80/mo plus fees.  When I look at the Republic Wireless bill for 4 gigabtyes it is also $80/mo.  My husband recently financed a phone through Verizon but I'm wondering if it could be returned and we could buy our own phone instead of the ridiculous amount he paid to finance the phone.

Electric:  We added on to a 1950's farmhouse and have been trying to upgrade the insulation etc., but I feel we could do better here if I could just figure out what to do.  We also have electric that goes out to the barns. 

Of course your biggest money saver will be your kids growing up and moving out :p


Got a point there :).

BTW,  we get a break on our real estate taxes for keeping our land in farm use.  This probably offsets a lot of the costs of the farm although some days I think it would be easier to just pay the taxes.  I also added up the expenses again and got $2910 without the education costs so I think most of it is there. 

StacheInAFlash

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Re: Case Study: Large Rural family
« Reply #11 on: December 31, 2015, 12:26:00 PM »
Commute/Gas:  I suspect that not everything he gets from the gas station is actually gas (coffees, snacks, etc.)

Teens/Kids:  Neither have a cell phone or a license.  ... I think that the car insurance is so high because we have 4 vehicles. 

1) He needs to stop buying crap at the gas station. Make coffee at home and buy snacks in bulk at the grocery store or make at home. I'm blown away by people who actually go into the gas station when they stop to get gas. Unless I'm treating it as a bathroom break on a long, multi-hour drive, I just don't do that. I can't even remember the last time I went into a gas station to buy random shit.

2) So....here comes a face punch. you have 4 vehicles for 2 licensed drivers? WTF are all those extra vehicles for? They better be old farm trucks that cost nothing to insure and are only operated every now and again within the confines of the farm.

sweettea

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Re: Case Study: Large Rural family
« Reply #12 on: December 31, 2015, 12:57:03 PM »
Commute/Gas:  My husband is an equipment operator so he can't work from home, but he has switched to every other Friday off.  I suspect that not everything he gets from the gas station is actually gas (coffees, snacks, etc.)  We also drive to church 2-3 times a week, drive kids to Tae Kwon Do, football practice in the fall.  We live on a major 4 lane highway.  Thankfully not too far from town (7 miles) but it still all adds up.
How fuel efficient is his (hopefully not a truck!) car / is it the most fuel efficient vehicle you have? Or does he need to provide his own pickup to tow equipment?

Can you get him a giant thermos and make sure he always leaves with it full of coffee? Store a box of the most delicious health snacks / homemade nut mix/granola in his vehicle?

Teens/Kids:  Neither have a cell phone or a license.  My daughter recently got a part time job in town, but that means I am also driving her there several times a week as well.  All the kids have farm chores and the older ones help my husband with the lawn business.  He pays them to do the weedeating/push mowing.  The older two buy their own clothes, pay for their own entertainment.  The younger ones get hand me downs or thrift store clothes :).
Excellent!

Electric:  We added on to a 1950's farmhouse and have been trying to upgrade the insulation etc., but I feel we could do better here if I could just figure out what to do.  We also have electric that goes out to the barns. 
I assume you already turn down the thermostat (at least at night) during the winter, open the windows at night during the summer, and use the dryer only when you can't dry clothes outdoors? And, assuming you have electric heat, ya'll don't heat rooms you aren't in insofar as possible?

BTW,  we get a break on our real estate taxes for keeping our land in farm use.  This probably offsets a lot of the costs of the farm although some days I think it would be easier to just pay the taxes.  I also added up the expenses again and got $2910 without the education costs so I think most of it is there.
Yes! At least in some states, if you take land out of active agricultural use, you're responsible for the past 5 years of non-agricultural taxes on your property --- I definitely don't think cutting out the farming is a good idea!

2) So....here comes a face punch. you have 4 vehicles for 2 licensed drivers? WTF are all those extra vehicles for? They better be old farm trucks that cost nothing to insure and are only operated every now and again within the confines of the farm.

You probably already know this, so forgive me for repeating it: if you have 2 farm vehicles (which is fine, if they're useful), generally insurance should _not_ be covering them. Moreover, at least in my state, farm vehicles do not need their registration updated like a normal vehicle, but merely need the submission of a (free) form that states they're farm vehicles.

meandmyfamily

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Re: Case Study: Large Rural family
« Reply #13 on: January 01, 2016, 03:44:50 PM »
Your groceries are awesome!!!

Wndwmn

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Re: Case Study: Large Rural family
« Reply #14 on: January 02, 2016, 06:20:57 AM »
The four vehicles are:

Chevy Cobalt (commuter car)

Kia Sedona (family minivan)

Dodge Dakota (farm pickup, also takes trash to the dump)

Ford Excursion (second family vehicle, also hauls pigs to farm show/market)

I'm thinking about selling the minivan since we can still fit all the family in the Excursion.  We also like to use the Excursion for longer trips since there is more room.

Thanks for all the kind words about the groceries.  I do work hard on that.

Thegoblinchief

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Re: Case Study: Large Rural family
« Reply #15 on: January 02, 2016, 01:48:55 PM »
How do you track spending and budget? While it costs money, a tool like YNAB can really help in situations where income and expenses are uneven. It's somewhat akin to a digital version of the Dave Ramsey envelope system but much more flexible and less time consuming since you're not handling physical bills.

john c

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Re: Case Study: Large Rural family
« Reply #16 on: January 03, 2016, 01:26:41 AM »

Ford Excursion (second family vehicle, also hauls pigs to farm show/market)

I'm thinking about selling the minivan since we can still fit all the family in the Excursion.  We also like to use the Excursion for longer trips since there is more room.


I think you're going the wrong way on selling the minivan and keeping the Excursion.  What is the difference in mileage between the two vehicles?  My minivans get 20-22 mpg and my guess is that the Excursion gets 12 mpg.  The Excursion is probably worth much more than the minivan, if you should sell it.  Also, can you really afford to raise, show, and market pigs?  It seems like it's a serious net loss for you, if you added up all the costs.  If it's a matter of keeping your land in agriculture, are there other ways to do it for less?