Case Study: Low Income in a Rural Area

[Amber]

Hi everyone! I have a mini stache but my hubby mostly thinks we should live in the present. He has slowly but surely been working on becoming more mustachian over the past 7 years, but not quite there yet. Please give him some slack ;) Face punching.... commence.
 
Take home: $2875 (not terrible for rural northern Michigan but we are both working on increasing this)
Mortgage/taxes:$505 ($83,000 left, worth about $90,000)
Food:$300 (We eat really well, I cook mostly from scratch. No big box stores up here. This will be decreasing this summer from our first garden.)
Utilities: Average $240 (Water, sewer, trash, heat, and electricity. No a/c in summer, heat between 60-70 in winter)
Dog $25 (We are not getting rid of her. Lol)
Gas $400 (I know this is a LOT and we are looking for a home closer to work as soon as our student loan and car debt is paid off. Hubby works 20 miles away, I work 8 miles away and drive home for my 2.5 hour lunch break. We don't drive anywhere but work except when we go to our parent's houses about once a month which are 2 and 4 hours away.)

*I drive home at lunch to see my hubby and pup. He works nights while I work days, so my lunch is our "evening" to spend together. I do stay in town if I have errands to run, grocery shopping, etc. but that's only one day/week max, otherwise I'm just twiddling my thumbs while missing quality time with my husband.

Cable $40 (Can't convince hubby to cancel)
Internet $45
Phones $100
Me personal $10
Hubby personal $80 (I'm very happy with this number. It used to be over $300!!!! and I'd MUCH rather be happily married than retired early.)
Us personal $30 (Dinner dates with friends mostly)
Car/home/life Insurance $160
Student Loan $140 ($8000 left at 4%)
Car loan $100 ($2000 left at 3% on a 2002 Subaru WRX.) We also have a 2001 Subaru Forrester.
Total $2175
We are currently throwing everything extra towards these loans, which is about $700, and hope to be done with them by February.
After that, we are planning to max out contributions to our 401k, which has a 6% employer match.

*This is a 100% match up to 6% of salary and we are not contributing yet.

We are also planning to throw everything extra at our mortgage and pay that off within 7 years while renting it out.
Meanwhile, we are going to buy a couple rentals closer to work and live in/renovate them then rent them out. We are both very handy! The rent will be thrown at those loans and paid off within 8 years, then the rent will fund our retirement.

I would like to retire within 5 years and my husband would like to retire in 10. These calculations do not include any increase in income, which we both expect in the next few months. Does this plan seem legit? Is there anything that is glaringly obvious to other mustachians that I have overlooked? Any and all advice would be greatly appreciated!!! Thank you in advance :)

*Thank you all for the quick responses and questions! Hubby is going to sign up for his 401k next month because of the advice here. And yes, we live in the Yoop!!! Proud to live in one of the most beautiful places on this planet :)

[Greg]

It sounds not that bad. 

I would question the need to come home for lunch everyday.  In a subaru that's probably costing you a couple of hundred a year.

Once you kill those extra loans you'll be much better off. The $2K on one of you cars will be done quickly if you can just nuke it.  That would feel good.

[RetiredAt63]

2.5 hour lunch break? Are you working split shift? Is there something you could do close to work to not have the drive? OTOH, depending on your schedules, your dog may be thrilled to see you at lunch every day. I'm with you, don't give up the dog, beloved pets are an essential part of what makes life good.

Only other thing that seemed high was the phone.

[phred]

2.5 hour lunch break? Are you working split shift?

I believe lunch at home was so she could spend some time with her husband as they are on different work shifts. 

[horsepoor]

If I read this right, you are forgoing a 100% match on pretax income to pay off a 3% car loan early?  That's like giving up a 114%* return for a 3% return.

Don't do that.  :)

Start contributing yesterday, as much as you can, and pay the minimum on that 3% loan.

Anyway, I don't really see how you could retire in 5-10 years unless you already have some major assets you aren't mentioning, or are older and will be able to draw some sort of SS or pension.  Your expenses (gas) will be reduced, but you'll have health care expenses, which I don't see itemized here, so assuming that is currently part of your benefits package.

100% match plus 7% market returns on your contribution and employer's.

[samburger]

You're in the Yoop? 400 on gas is ABSURD. I can't imagine how you're racking that up... I lived in one of the lil towns up there and did less than a tank a month. $400/mo is what I did when I moved to a city commuted 120 miles each day. I would pay serious attention to that category.

ETA: Wait, wait. Just noticed this.

We don't drive anywhere but work except when we go to our parent's houses about once a month which are 2 and 4 hours away.

I would pay attention to this: There's no way you're not driving anywhere. Subarus don't get great mileage, but they shouldn't be so bad that driving to and from work is costing you 400/mo. Mindless little trips add up big time, especially if you're out in the sticks and you have a significant drive to town.

[Argyle]

I agree, you need to start getting that employer match right this minute, if I read you right and you're not.  This is much more important than paying off the 3% loan.  Or maybe you mean you're getting the match but not yet maximizing the savings?

You don't say what kind of assets you have.  What is your retirement savings?  Any other assets?

It sounds as if it would be beneficial to start tracking every mile you drive in the car, and figure out why that number is as high as it is.  If you keep on living so far from work, a hybrid might be in order (if you can do it without losing a ton of money) to cut down your commute expenses.

[Left]

on the car/gas... do you know which car it is that uses more gas? but overall, I don't think it's that unreasonable for the gas cost. Makes sense to me anyways you drive 32 miles/day (2 round trips) and husband driving 40 miles/day. I drive 60 miles/day (I'm not happy about it but no choice right now). I spend about $30-$40/week on gas. With two cars going slightly less than me each, then add in the monthly parent trips and I could see you spending $400/month on gas.

but on that note, if the wrx uses more gas, have the husband drive it (even though miles are similar, you making two trips makes it less gas efficient because of the shorter trips). Or both of you drive the forester to work if you get home in time for him to use it. Then you drive wrx in morning then take the forester in the afternoon. Not sure how the wrx is tuned also, but you could get it changed a bit on the turbo setting to provide better gas efficiency at the cost of power/speed. Unless one of you are racing to work and burning gas on the turbo but that's you guys choice :).

edit: also wrx uses the more expensive premium gas. Use the forester more for that reason too. Unless you have the turbo version of that as well

[RetiredAt63]

You are right, I missed that - to me the extra driving cost is worth it in that case.  Unfortunate about the schedules, but . . .

2.5 hour lunch break? Are you working split shift?

I believe lunch at home was so she could spend some time with her husband as they are on different work shifts.

[Rural]

I imagine you want that debt gone ASAP, but you're shooting yourself in the foot not getting that match. I'd change that, and try to optimize the vehicles so that the one with the best fuel mileage is the one that makes two trips daily as another poster suggested.