Author Topic: Having trouble reducing housing and transportation costs  (Read 5054 times)

FranklinDelanoRomanowski

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Having trouble reducing housing and transportation costs
« on: July 28, 2013, 12:57:40 PM »
I'm working toward financial independence but I have a few challenges I'm not sure how to address.

A little background info: my wife and I are both 29 and we have two kids under 3. My wife and I both work, but my wife actually earns a little less at her job than what daycare costs (I realize this is not ideal).

There are certain things on which I'm all set:
- I have no debt
- I have a relatively high earning power (currently earning $50/hr, full-time)

But I also some problems that are really hindering my savings rate:

1) Housing costs. Right now we pay $1075 in rent, which is way more than what we need to pay. Luckily, our lease is up in just a few months. My wife and I would like to buy a house (I'm thinking a <= $50K house with a <= 15 year mortgage) but unfortunately I can't get a loan due to my employment situation. According to the loan officer I need to have either a full-time job or two years of self-employment in order to get a loan, and I have neither. What's more is that any job through a staffing agency not only doesn't count as a full-time job, but any staffing agency job also resets the clock on self-employment. I have a staffing agency job now and it's looking like my next job will be another staffing agency job as well. So I might be screwed in the loan department. The remaining option, of course, is to rent somewhere cheaper, which is what I guess we'll do. The problem with that is that my wife seems to be unwilling to go below a certain standard of living. She's really not on board with the whole financial independence idea.

2) Transportation costs. We've been a one-car family before but now we have two cars. My wife and I both work downtown, which is about 8 miles from our apartment. My wife is not willing to ride a bike except for leisure, but we could conceivably get rid of one car and I could ride my bike to work each day instead of drive. The problem with that is that my wife starts work pretty early each day before daycare is ready to take our kids, so I take the kids to daycare, meaning we both have to drive. Obviously, she could just stay home and we could save money a) by not paying for daycare, which costs more than she earns at work and b) by being able to shed one car. However, my wife is really adamant about having a job because she likes having a job (I wish I did!), so unless I want to say "thou shalt not have a job" we have to live with that constraint.

If I could be paying <= $500/mo in rent/mortgage, and paying only for one car (or better, 0 cars), that would be fantastic. Unfortunately I'm having a hard time seeing how I could accomplish this without putting on my dictator cap and making my wife miserable. Any ideas?

matchewed

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Re: Having trouble reducing housing and transportation costs
« Reply #1 on: July 28, 2013, 01:00:46 PM »
You and your wife are on two different pages on this. Until that is resolved in some form any advice for going forward is useless.

girly mustache

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Re: Having trouble reducing housing and transportation costs
« Reply #2 on: July 28, 2013, 01:59:04 PM »
you could still get rid of your car and bike the kids to day care via a buggy in the back or a cargo bike - kids loves bikes and the commute is much more fun for them on bike than in a car. May daughter gets upset on days we have to take the car....

Catbert

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Re: Having trouble reducing housing and transportation costs
« Reply #3 on: July 28, 2013, 02:24:23 PM »
I would talk to another loan officer and/or mortgage broker.  It seems unlikely to me that nobody would loan you money if you have good credit and 2+ years of tax returns showing high earnings.  Maybe you could qualify with a higher down payment or pay a higher rate.  Also a good mortgage broker (and some RE agents) would know about 1st time buyer programs that you might qualify for.

daverobev

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Re: Having trouble reducing housing and transportation costs
« Reply #4 on: July 28, 2013, 03:15:41 PM »
$50/hour is $2k a week at 40 hours. Which is $100k a year.

If you can find a house for < $50k, you should be able to save up for it in less than two years, no? Can you get a line of credit or similar - even $20k @8% would mean you can buy a house in a year.

*Edit* and re transport - when you move.. move closer to downtown! How much is the car costing you, vs how much a place close enough to have 1 car would cost?

BPA

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Re: Having trouble reducing housing and transportation costs
« Reply #5 on: July 28, 2013, 03:20:53 PM »
You and your wife are on two different pages on this. Until that is resolved in some form any advice for going forward is useless.

I agree with this.

And I wonder if it might be better for whichever one of you consistently makes less money take a leave or quit.  It seems it is costing your wife to work if daycare costs more that what she makes and then she needs a car for work.

CrochetStache

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Re: Having trouble reducing housing and transportation costs
« Reply #6 on: July 28, 2013, 03:45:37 PM »
I don't know what kind of work your wife does but maybe these lower earning years that she is putting in now could be what leads to power earning years at a time when the little ones are in school full time. This can be what allows for even greater savings in the long term financial picture. Her future job may be the one that allows the family to qualify for that mortgage.

She is keeping what is important to her well being at this time and that will translate to her being a stronger mother to the kids. It's hard to put a price on that.

Although you don't provide any numbers as far as current savings rate and how much you would like to be saving each month vs. how much she is interested in saving each month. Maybe there is a happy savings rate % in the middle you can each agree to work for?

FranklinDelanoRomanowski

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Re: Having trouble reducing housing and transportation costs
« Reply #7 on: July 28, 2013, 04:02:37 PM »
You would think that someone earning $100K per year would be able to save enough in a couple years to buy a $50K house, but with my family's current lifestyle, at about a 10% savings rate, it would take more like 5 years, which to me is not acceptable. A 10% savings rate is pretty low. (We have about $5K in savings right now, after a freelancing stint of mine in 2012 which left us savings-less.)

Regarding the loan, the officer I talked to quoted standards set by Fannie Mae and Freddie Mac that everyone has to follow. I hope for my own sake that he was somehow mistaken, but it didn't sound likely that there was any way around it other than to get a co-signer (which may be an option and I'm looking into it).

About moving closer to downtown, that's a good idea and I totally agree. I've usually arranged it in the past so my work is a 5-10 minute bike ride from home, but a lapse of reason on my part allowed us to live farther away. Our next place will be closer.

mlipps

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Re: Having trouble reducing housing and transportation costs
« Reply #8 on: July 28, 2013, 10:05:24 PM »
If your rent is $1000, you earn $100k, and your savings rate is 10%, there's a bigger problem here.

girly mustache

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Re: Having trouble reducing housing and transportation costs
« Reply #9 on: July 28, 2013, 11:09:31 PM »
And I would be wary of, "thou shalt not have a job" and "dictator" type thoughts - marriage is a team sport - I doubt either of those thoughts will take you down a road you want to travel :)

FranklinDelanoRomanowski

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Re: Having trouble reducing housing and transportation costs
« Reply #10 on: July 29, 2013, 05:45:22 AM »
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If your rent is $1000, you earn $100k, and your savings rate is 10%, there's a bigger problem here.
Yup. It's embarrassing. That's why I'm trying to cut expenses.

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And I would be wary of, "thou shalt not have a job" and "dictator" type thoughts - marriage is a team sport - I doubt either of those thoughts will take you down a road you want to travel :)
I know. I'm saying I DON'T want to do these kinds of things.

matchewed

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Re: Having trouble reducing housing and transportation costs
« Reply #11 on: July 29, 2013, 06:16:07 AM »
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If your rent is $1000, you earn $100k, and your savings rate is 10%, there's a bigger problem here.
Yup. It's embarrassing. That's why I'm trying to cut expenses.

mlipps' point is that your transportation and housing costs may not be the culprit in your particular circumstances. Do you know where your money is going?

FranklinDelanoRomanowski

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Re: Having trouble reducing housing and transportation costs
« Reply #12 on: July 29, 2013, 07:26:03 AM »
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Do you know where your money is going?

My wife and I made a list a few weeks ago of all our expenses as a first step toward designing a budget. I was surprised to discover that there didn't seem to be anything out of the expenses that seemed frivolous. Maybe we need to re-define frivolous.

For example, we have both Netflix and Hulu (no cable). That's only a total of less than $25/mo, but perhaps we should kill both.

I forget what's on the list, so maybe I should go back and check the list.

aj_yooper

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Re: Having trouble reducing housing and transportation costs
« Reply #13 on: July 29, 2013, 07:50:52 AM »
FranklinDelanoRomanowski you need a New Deal!  I would tabulate your current expenses and develop a budget with your wife.  Some people post their expenses to get advice from the group; others use Mint.com to get ongoing feedback on their expenses.  I would guess that there is room for improvement right now.

cerberusss

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Re: Having trouble reducing housing and transportation costs
« Reply #14 on: July 29, 2013, 08:01:57 AM »
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Do you know where your money is going?
My wife and I made a list a few weeks ago of all our expenses as a first step toward designing a budget. I was surprised to discover that there didn't seem to be anything out of the expenses that seemed frivolous.

I bet the list is nowhere complete. When I was first starting with the MMM thing, I thought there wasn't much I could cut. Except there was $100 in TV dinners, $200 in beers and concerts, $100 in restaurants and $200 in gadgets, e-books and games.

matchewed

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Re: Having trouble reducing housing and transportation costs
« Reply #15 on: July 29, 2013, 08:07:57 AM »
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Do you know where your money is going?

My wife and I made a list a few weeks ago of all our expenses as a first step toward designing a budget. I was surprised to discover that there didn't seem to be anything out of the expenses that seemed frivolous. Maybe we need to re-define frivolous.

For example, we have both Netflix and Hulu (no cable). That's only a total of less than $25/mo, but perhaps we should kill both.

I forget what's on the list, so maybe I should go back and check the list.

So the answer is no.  ;)

I'd start there with your wife. Sit down again and go over your expenses over the last six months. Figure out where your money is going. Then solicit her feedback. Where does she think you guys can cut back given this information? Where do you? Where do you guys overlap, that will be the easiest to tackle. Work from there, set goals...etc.

FranklinDelanoRomanowski

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Re: Having trouble reducing housing and transportation costs
« Reply #16 on: July 29, 2013, 08:17:06 AM »
That's good advice. Thanks.