Author Topic: High Spending vs Killing Yourself on the way to FI  (Read 8019 times)

hodedofome

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High Spending vs Killing Yourself on the way to FI
« on: October 22, 2014, 12:07:23 PM »
Current situation:

My income ~$70k pre-tax
Wife's income was ~$30-40k when she was a teacher, has stayed home the past 3+ years once our oldest son was born so she didn't make anything during that time. Currently have an almost 4 year old and 1 year old (both boys). A year ago she started a multi-level marketing business out of the house and it has taken off pretty well for a stay at home mom. She's now consistently making ~$5-6k a month and hopefully that will increase in the future. We are 34 and 32, didn't start saving until about 5-6 years ago I guess.

No debt besides house
House: owe $98k, probably worth ~$130k w/ 5% interest rate. Just make the minimum payments.
~$60k in savings/emergency fund (most of this is invested)
401k, regular and ROTH IRA's: ~$150k
Couple of cars paid for

Not bad, but I'm disappointed in our spending and savings rate. I'm trying to FIRE asap as I don't care much for my job (well, at least on the days my boss is in the office!). You'd think with a monthly income over $10k that we'd be socking it away according to some on this site, but we're having a hard time with it.

Part of it is my wife does have business expenses - throwing parties, mailing thank you notes, giving away product samples, promotional items, conferences etc. Part of it is we've had to increase our spending to keep from killing ourselves with the extra work. She is a stay at home mom but basically has a full-time job now. She works during the boy's naps, in the evenings, early in the morning, on the weekends. We put our oldest in mothers-day-out ($$) so my wife can get some work done. We hire babysitters at least a few times a week so she can get some work done ($$). We have a housekeeper come every 2 weeks since my wife doesn't have time to clean the house anymore ($$). We eat out more since there's times my wife didn't get dinner made ($$). If we tried to do all the housework and the child raising and our jobs, I think we'd probably fall over dead. I try to do some housework when the boys are in bed, but I only have so much energy by that point in the evening. The house is a wreck on most days, it depresses my wife and I but it is what it is. I'm still taking care of the lawn myself, and we're trying our best to keep up with the laundry ourselves.

Our boys are also eating everything under the sun and the grocery bill is driving me insane! I don't pay up for the natural foods, but my wife prefers them.

Are there any other folks out there that are succeeding under similar scenarios? I feel like we could honestly use a housekeeper weekly, as well as a weekly laundry person, but I'm just tired of spending so much. I'd like to be saving $5k a month, but it seems like we're only saving $1-2k. I know our lives are the most time-consuming when the kids are little, and we weren't really seeking a job for my wife yet, but it just kind of fell into our lap and we're going with it for now. Life feels really busy and I'd be ok with it if we were getting something out it (like lots of $$ so that I can FIRE quickly), unfortunately I feel like we're spinning our wheels and only getting a little. We are definitely saving more with her job, just not as much as we'd like...

Chrissy

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #1 on: October 22, 2014, 12:33:16 PM »
Copy and paste this over at "Ask A Mustachian".

Cheddar Stacker

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #2 on: October 22, 2014, 01:55:10 PM »
Maybe I'm crazy and parents with more experience can tell us we're nuts, but I think this will be one of the hardest times to save money. I have a 4 y/o and 1 y/o as well. My wife only makes about $10K/year while raising the kids, and keeping our lives in order. I know we could do it in a more efficient way and save more, but I understand what you're saying. This is a very tiring time in the life of a parent.

If you send your kids to public schools when they reach the proper age, it must get a bit easier to manage your time and save a little more money. They will be out of the house for 7 hours/day, and you don't have to pay for it directly. Next fall our older son will be in public pre-school and that alone will save us a few hundred dollars per month.

Keep plugging away, time is on your side.

Maybe look into a mortgage refi as well. 30 yr rates were ~4% this week.

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #3 on: October 22, 2014, 02:01:49 PM »
If you send your kids to public schools when they reach the proper age, it must get a bit easier to manage your time and save a little more money. They will be out of the house for 7 hours/day, and you don't have to pay for it directly. Next fall our older son will be in public pre-school and that alone will save us a few hundred dollars per month.

That's what I am thinking as well. If my wife just had several hours to herself during the day, I know life wouldn't seem so crazy right now.

Mods, if this is in the wrong forum, please move it. Thanks.

Gone Fishing

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #4 on: October 22, 2014, 02:16:00 PM »
Is she netting $5-6k a month or grossing $5-6k a month before expenses? 

Dee18

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #5 on: October 22, 2014, 02:47:50 PM »
Seems like yesterday when I was juggling what you are now. I'll throw a few ideas out.  Sounds like you and your wife need to try to find a few hours to sit down without the kids and make some plans.  One key area is food.  As others have pointed out, eating out is not a time saver; it's what we do when we are too tired to think wisely about eating.  Get a crock pot if you do not have one.  If you eat meat, plan at least one meal a week where you enough cook meat in the crock pot for two meals--one to eat that night and for for a couple nights later.  To start out:  plan to eat the same meals each day of the week for a month.  Something like:
Sunday: Crock pot meat plus vegetables of choice, fruit for dessert
Monday:  Spaghetti plus vegetables of choice, fruit for dessert
Tuesday:  Tacos made with left over meat with salad
Wednesday:  Rotisserie chicken from the grocery (while there, pick up any needed produce or milk), rice, veggies
Thursday:  Vegetarian chili or lasagna--maybe Thursday will be even have dessert
Friday:  Pizza and salad
Saturday:  alternate parents night out with having a fun, even silly, dinner at home--complete with paper hats--we had Saturday night Yahtzee and Uno when my daughter was four...I swear it is how she learned math.  She taught all her friends both games.
Choose any schedule you like and any foods you like.  Just repeat them every 7 days.  Go ahead and plan out the vegetables and whether they will be fresh or frozen. It really makes life simpler.  "Salad" for kids simply means carrots, etc, with hummus in our house.  Keep a few prepared frozen meals ready---if you don't want to do them homemade watch for Stouffers casseroles to go on sale.  Kids like routine like that.  While the kids are young get them used to eating healthy.  Pick two stores to shop at only for food.  For me it's Aldi's and Publix (our major grocery chain).  You might even just go for one.

As for cleaning:  Again, think systems.  What is making it all so hard?  Probably way too much stuff.  Really.  For kids that age, have a bunch of low cost (you can buy them at consignment sales for next to nothing) paints in neutral colors (khaki and denim are all you need) and shirts.  Add socks---all one color so there is no matching!-- and underwear/diapers and two pairs of shoes only, no more, for each child.  Add outerwear as needed.  Older boy can pick out a shirt the night before.  They are good to go.

As for toys, pick a shelf or bin and let each child have toys in it.  Pack everything else away.  Each week the children can trade in a couple toys for different ones.  Have a small table near the kitchen for coloring/  play dough for the older child to do while someone is pulling together dinner.  Have some sort of play thing (do they still make the exersaucer?) for the one year old.

Minimize the adult wardrobes as well.  Think of your work clothes as uniforms.  Simplify and focus on wash and wear.

Are all the rooms as easy to care for as possible?  Bed linens minimized?  Make sure you are not creating more laundry than necessary. 

In short, be practical.  Figure out where else time is going.  If things spin out of control, you end up going for carry-out, running to the drugstore for some last minute item for a kid or a project, etc.  That all eats up more time. 

Best of luck!  Before you know it, they'll be filling out their college applications....and really, truly eating a lot.

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #6 on: October 22, 2014, 03:59:25 PM »
Thanks Dee, some good stuff in there to chew on.

So Close: She is grossing $5-6k. Self-employment taxes are gonna suck so I'm not sure what it'll net out to be. But for sure, we are saving more with her working than when she wasn't (we were basically breakeven each month with just my salary).

La Bibliotecaria Feroz

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #7 on: October 22, 2014, 04:25:00 PM »
It seems misleading to talk about gross when she has expenses. It's great that you're saving more, but having a better idea of her actual profit will help you know better what the impact of her self-employment is. Plus, she will only have to pay taxes on the profit, not the gross.

If she is earning income, you should be able to take a tax credit for mother's day out. Nice perk.

Melody

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #8 on: October 22, 2014, 04:35:34 PM »
Sounds like you could benefit from a au pair. This is a European girl who will work as a nanny (and do light housework) in exchange for room, board and a stipend, usually like $100/wk. This sounds like it would cost less than all the babysitters and provide the advantage of a cool cultural experience for your children.

mamagoose

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #9 on: October 22, 2014, 07:01:49 PM »
I'd look into Mother's Morning Out programs to give your wife a break, a few hours a day for a few days a week. They are often offered at Methodist churches and are very affordable, so Google in your area and see what you come up with. Another idea from a WAHM friend is to join a gym that has good childcare and wifi, especially since it sounds like your wife's job is mobile-friendly. Drop the kids off and use an hour at a time to crank out emails, write thank you notes, etc. etc. Even at $100/month in our town, it's the cheapest babysitter you can find and a great way to establish some type of daily routine for the kids.

Regarding hiring a housekeeper, I would say no. I work from home with a 14 month old (self employed) and it's a fact of life that houses get messy with young kids. I did hire a maid to come one time to clean the bathtubs, etc (stuff I couldn't do with an infant on my hip) and it was one of those things I'll only do once (like paying to get my car detailed). I have since learned to live with the fine layer of Cheerio dust on every surface in the house. Another way to look at it is that doing the housework sets a good example for the kids, i.e. they can see how you sweep/do dishes/fold laundry. My daughter LOVES to help me fold laundry, and likes to push the Swiffer around the kitchen too. If I'm in a bad mood already, doing housework seems like the most sysyphean (sp?) task ever and I hate it, but if I look at it as my meditation time then I tend to enjoy it and it's nice to keep busy with my hands.

greenmimama

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #10 on: October 23, 2014, 11:15:09 AM »
This time in your life can be very energy sucking times of your life, we have a 3,5, and 8 yo I know what you are going through. BUT that being said, don't use this time as an excuse to get behind on your savings goals, you will regret it.

I think you need to write down goals and work together more, say after you put the kids to bed, you both take 20min and clean up, it will make a huge difference, keep laundry going, every morning put a load in and ask your wife to stick it in the dryer once it's done, then fold and put away once you get home.

If you want to save money and you both want her to continue to work, teamwork is going to play a major role.

Thegoblinchief

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #11 on: October 23, 2014, 12:18:54 PM »
We earn less than your gross salary alone, have some ridiculously expensive debt service, one more kid, and we save at least half our income.

How on earth were you only "break even" on $70K gross?

Also, multi-level marketing? Glad she's making money, but those schemes make my skin crawl.

skunkfunk

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #12 on: October 23, 2014, 12:39:48 PM »
You've got to break the expenses out of that 5-6K your wife makes. You can't consider that income, only the net.

Are you tracking expenses? They should be deductible or you'll be paying far more taxes than you should.

Future Lazy

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #13 on: October 23, 2014, 03:05:24 PM »
Part of it is my wife does have business expenses - throwing parties, mailing thank you notes, giving away product samples, promotional items, conferences etc. Part of it is we've had to increase our spending to keep from killing ourselves with the extra work. She is a stay at home mom but basically has a full-time job now. She works during the boy's naps, in the evenings, early in the morning, on the weekends. We put our oldest in mothers-day-out ($$) so my wife can get some work done. We hire babysitters at least a few times a week so she can get some work done ($$). We have a housekeeper come every 2 weeks since my wife doesn't have time to clean the house anymore ($$). We eat out more since there's times my wife didn't get dinner made ($$). If we tried to do all the housework and the child raising and our jobs, I think we'd probably fall over dead. I try to do some housework when the boys are in bed, but I only have so much energy by that point in the evening. The house is a wreck on most days, it depresses my wife and I but it is what it is. I'm still taking care of the lawn myself, and we're trying our best to keep up with the laundry ourselves.

Well... I don't make more than 24k a year, and I also don't have kids, and I also live in a basement, so definitely take my youthful situation into account when I say this... But I do save $1000 a month because of my low expenses, and I do understand business models well enough. Maybe this will mean something:

If you have business expenses, your profit is not your GROSS income, it's your NET income. So...
5-6k/mo minus... Thank you cards, parties, etc... = your wife's actual income. Without those numbers listed above, I can't say what that looks like, but if she's really running a business, those expenses should be kept completely separate from your personal finances and she should be turning enough profit to pay herself each month. Balance those books. Try reading a bit at Affordanything.com, she writes a lot about how to run a business, how to delegate and how to pay yourself for your time.

On top of that... 5-6k - business expenses = ?? - the cost of day care, the cost of housekeeping, the cost of food when dinner couldn't be made ... Equals what? A thousand dollars? Less? In the hole? Although it's pretty important to have goals and a purpose and creative space to work on things (like this business your wife is enjoying building), if you're spending so much on housekeeping and other things that aren't getting done in lieu of the business, you're not actually making anything. Then it's just a hobby.

Take this into consideration. It sounds like you haven't really  considered making yourself a detailed budget yet, and I would really recommend taking the time to write down ALL of your income, and also ALL of your expenses for the last 30 days. Figure out where the money is going, and stop the leak.

Didn't really skim any other posts in this thread, apologies if any of this is repeated stuff!! :)

Gin1984

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #14 on: October 23, 2014, 04:51:13 PM »
Part of it is my wife does have business expenses - throwing parties, mailing thank you notes, giving away product samples, promotional items, conferences etc. Part of it is we've had to increase our spending to keep from killing ourselves with the extra work. She is a stay at home mom but basically has a full-time job now. She works during the boy's naps, in the evenings, early in the morning, on the weekends. We put our oldest in mothers-day-out ($$) so my wife can get some work done. We hire babysitters at least a few times a week so she can get some work done ($$). We have a housekeeper come every 2 weeks since my wife doesn't have time to clean the house anymore ($$). We eat out more since there's times my wife didn't get dinner made ($$). If we tried to do all the housework and the child raising and our jobs, I think we'd probably fall over dead. I try to do some housework when the boys are in bed, but I only have so much energy by that point in the evening. The house is a wreck on most days, it depresses my wife and I but it is what it is. I'm still taking care of the lawn myself, and we're trying our best to keep up with the laundry ourselves.

Well... I don't make more than 24k a year, and I also don't have kids, and I also live in a basement, so definitely take my youthful situation into account when I say this... But I do save $1000 a month because of my low expenses, and I do understand business models well enough. Maybe this will mean something:

If you have business expenses, your profit is not your GROSS income, it's your NET income. So...
5-6k/mo minus... Thank you cards, parties, etc... = your wife's actual income. Without those numbers listed above, I can't say what that looks like, but if she's really running a business, those expenses should be kept completely separate from your personal finances and she should be turning enough profit to pay herself each month. Balance those books. Try reading a bit at Affordanything.com, she writes a lot about how to run a business, how to delegate and how to pay yourself for your time.

On top of that... 5-6k - business expenses = ?? - the cost of day care, the cost of housekeeping, the cost of food when dinner couldn't be made ... Equals what? A thousand dollars? Less? In the hole? Although it's pretty important to have goals and a purpose and creative space to work on things (like this business your wife is enjoying building), if you're spending so much on housekeeping and other things that aren't getting done in lieu of the business, you're not actually making anything. Then it's just a hobby.

Take this into consideration. It sounds like you haven't really  considered making yourself a detailed budget yet, and I would really recommend taking the time to write down ALL of your income, and also ALL of your expenses for the last 30 days. Figure out where the money is going, and stop the leak.

Didn't really skim any other posts in this thread, apologies if any of this is repeated stuff!! :)
The cost of daycare here is over $1000/month and we live in a cheap area.

Future Lazy

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #15 on: October 23, 2014, 08:48:51 PM »
Part of it is my wife does have business expenses - throwing parties, mailing thank you notes, giving away product samples, promotional items, conferences etc. Part of it is we've had to increase our spending to keep from killing ourselves with the extra work. She is a stay at home mom but basically has a full-time job now. She works during the boy's naps, in the evenings, early in the morning, on the weekends. We put our oldest in mothers-day-out ($$) so my wife can get some work done. We hire babysitters at least a few times a week so she can get some work done ($$). We have a housekeeper come every 2 weeks since my wife doesn't have time to clean the house anymore ($$). We eat out more since there's times my wife didn't get dinner made ($$). If we tried to do all the housework and the child raising and our jobs, I think we'd probably fall over dead. I try to do some housework when the boys are in bed, but I only have so much energy by that point in the evening. The house is a wreck on most days, it depresses my wife and I but it is what it is. I'm still taking care of the lawn myself, and we're trying our best to keep up with the laundry ourselves.

Well... I don't make more than 24k a year, and I also don't have kids, and I also live in a basement, so definitely take my youthful situation into account when I say this... But I do save $1000 a month because of my low expenses, and I do understand business models well enough. Maybe this will mean something:

If you have business expenses, your profit is not your GROSS income, it's your NET income. So...
5-6k/mo minus... Thank you cards, parties, etc... = your wife's actual income. Without those numbers listed above, I can't say what that looks like, but if she's really running a business, those expenses should be kept completely separate from your personal finances and she should be turning enough profit to pay herself each month. Balance those books. Try reading a bit at Affordanything.com, she writes a lot about how to run a business, how to delegate and how to pay yourself for your time.

On top of that... 5-6k - business expenses = ?? - the cost of day care, the cost of housekeeping, the cost of food when dinner couldn't be made ... Equals what? A thousand dollars? Less? In the hole? Although it's pretty important to have goals and a purpose and creative space to work on things (like this business your wife is enjoying building), if you're spending so much on housekeeping and other things that aren't getting done in lieu of the business, you're not actually making anything. Then it's just a hobby.

Take this into consideration. It sounds like you haven't really  considered making yourself a detailed budget yet, and I would really recommend taking the time to write down ALL of your income, and also ALL of your expenses for the last 30 days. Figure out where the money is going, and stop the leak.

Didn't really skim any other posts in this thread, apologies if any of this is repeated stuff!! :)
The cost of daycare here is over $1000/month and we live in a cheap area.
Yeaaaah.

http://kdvr.com/2013/11/04/child-care-more-expensive-than-college-in-many-states/

and

http://www.usa.childcareaware.org/costofcare

For example.

Goldielocks

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #16 on: October 23, 2014, 11:30:44 PM »
Thanks Dee, some good stuff in there to chew on.

So Close: She is grossing $5-6k. Self-employment taxes are gonna suck so I'm not sure what it'll net out to be. But for sure, we are saving more with her working than when she wasn't (we were basically breakeven each month with just my salary).

Uh, oh.   Better do some tax math quickly.   I may have read your post wrong, but based on these facts:

1) Wife grossed $5k-$6k a month (let's call that $60k for this year)
2) You net $1-2k over your expenses (including kid care, more eating out, so not a huge amount of business qualified direct expense like postage)

And you have not been paying self-employment taxes as yet.     

SSI and Medicare / Medicaid portion are pretty high in the USA for self employment, right? 
Like $14k a year for full rate (high) income earners... (you pay $7k personal and $7 employer portion, for example)

AND at $60k per year, you can expect to pay federal and state taxes, if you are not already paying those.

You MIGHT just owe that $1-2k per month back to the government in taxes!  That would be a nasty surprise in April (or January) when you file....   Maybe PM CPAcat or "Ask a Mustachian" for  better advice than my post here...

Setters-r-Better

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #17 on: October 24, 2014, 05:25:52 AM »
I agree it sounds like you guys really need to get a handle on tracking and budgeting income and expenses for both business and household.  You could track the household stuff since it sounds like wife could be busy tracking business stuff.  She should get with a cpa now to make sure all taxes are covered and paid timely.

Cut the housecleaning until you have a better handle on the budget.  Post a detailed budget and the forum can give you much more specific advice.

so.mpls

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #18 on: October 24, 2014, 07:50:56 AM »
I think it would be helpful (both for you and for us to try to help) if you could put together a breakdown of exactly where your money is going each month.  If my math is correct, you're spending anywhere from 7-9k per month, which seems high even with the childcare costs figured in.

Another question - what type of hours do you work?  It seems like your justification for the cleaning service, eating out, etc is that your wife doesn't always have time to do those things.  What's stopping you from helping out?  If you're working 50-60 hour weeks it's more understandable, but if not I have a hard time believing that you can't find a half hour every few days to do some cleaning.  As you said, living in a messy/disorginized house is depressing and wears on you (in my experience anyways) and spending more $ for weekly cleaning isn't likely to fix anything in the long run.

Also, to echo what goblin said, I really hope your wife MLM business is not taking advantage of others.  It sounds like your lives could be a lot easier/cheaper if she dropped it and took care of the house/kids for a few years, with the added bonus of saving her soul.

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #19 on: October 24, 2014, 08:30:07 AM »
Thanks Dee, some good stuff in there to chew on.

So Close: She is grossing $5-6k. Self-employment taxes are gonna suck so I'm not sure what it'll net out to be. But for sure, we are saving more with her working than when she wasn't (we were basically breakeven each month with just my salary).

Uh, oh.   Better do some tax math quickly.   I may have read your post wrong, but based on these facts:

1) Wife grossed $5k-$6k a month (let's call that $60k for this year)
2) You net $1-2k over your expenses (including kid care, more eating out, so not a huge amount of business qualified direct expense like postage)

And you have not been paying self-employment taxes as yet.     

SSI and Medicare / Medicaid portion are pretty high in the USA for self employment, right? 
Like $14k a year for full rate (high) income earners... (you pay $7k personal and $7 employer portion, for example)

AND at $60k per year, you can expect to pay federal and state taxes, if you are not already paying those.

You MIGHT just owe that $1-2k per month back to the government in taxes!  That would be a nasty surprise in April (or January) when you file....   Maybe PM CPAcat or "Ask a Mustachian" for  better advice than my post here...

I'm aware of what you are saying and yes I've thought plenty about it. I'm trying to get her to track her expenses as close as possible, but this is her first time to ever work in a business (she was a teacher before) so she's not used to doing it. It's a quick and steep learning curve and trying to do all that plus raise two little boys and take care of a house is pretty exhausting for her. We know our pace of life is not sustainable in the long run. Either she will get burned out in a few years, the business will slow down once the market is saturated, or she will make so much that I'll quit my job and be a stay at home dad for a while. Her best friend is doing about $15k a month with this business, the neighbor that got her friend in the business is doing over $20k, and the girl that got the neighbor hooked is doing about $50k+ a month. They all got in at the right time so we're willing to push through, financially it could put us into FIRE in just a few years if she can stick with it (that's why we're willing to sacrifice the way we are currently). BTW if your wife wants to talk to my wife about Jamberry, she'd love to talk to them and it's still a ground floor company for most parts of the country! (shameless plug....)

But yeah, $60k is a rough estimate of what she'll make this year. I think she'll probably have $10-20k in expenses we can honestly claim under the business that we'll have receipts for. So let's say best case scenario is $40k net. We were in the 15% tax bracket, but I'm willing to bet she puts us over $72k in taxable income for the year, so that would bump us up to the 25% tax bracket. Then she'll owe 15% self-employment tax on top of federal tax, so that's 40% in taxes she'll owe on her income. 40% of $40k is a $16k tax bill. Ouch, but that's the way it goes.

So far this year I'm roughly guessing we've added $20-25k to our savings from her income. So we have enough to pay for the taxes, but then she won't have a ton left over. We've set up a LLC and her CPA will file her as a S-Corp next year. Under the S-Corp she'll pay herself a reasonable salary (say $30k) and the rest will be paid out as dividends. The dividends will only be taxed at the normal rate with no self-employment taxes, so next year that'll save her a little bit.
« Last Edit: October 24, 2014, 09:09:27 AM by hodedofome »

snshijuptr

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #20 on: October 24, 2014, 08:41:04 AM »
She MUST track her expenses or else she is spending YOUR money not the businesses money. She wouldn't spend thousands of dollars every month throwing parties at your house for friends taking money away from her kids college savings so the Business must do this. She has no income until she tracks expenses. Start budgeting your entire house and make a category for business expenses and create a manila folder at home and in her car for her to throw in every receipt.

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #21 on: October 24, 2014, 08:59:00 AM »
Here was our monthly budget before she started working:

Paycheck after taxes, 401k (I currently put in 5%) and health insurance deduction - $4,226.24 (my salary is $60k, the other ~$10k comes from bonuses)

Tithe - $500
Mortgage - $575
Property Taxes - $250
Homeowners Insurance - $70

Health Insurance for the wife and boys - $550 (we use Medishare, cheapest I could find. my work plan would be $1700 a month if I added them)
Electricity, water, trash - $250
Car Insurance - $76.50
Life Insurance/disability insurance - $105
Cell Phones - $120
Internet - $55
Gas - $225 (I work for a professional firm and there's no way I could ride a bike to work. Although we don't live far away from my work)
Groceries - $650
Car maintenance - $60
House expenses - $50
Baby supplies - $100
Clothing/dry cleaning - $50
Dog expenses - $20
Dental expenses - $20
Restaurants - $70
Trips/holidays - $60
Vacation - $60
Boys college fund - $50
Wife fun money - $20
Husband fun money - $20
Entertainment - $25
Gifts (birthdays, showers, charity) - $85
Christmas gifts - $50
Roth IRA contribution - $100

With bonuses we were trying to save all those, but inevitably every time I'd get a bonus we'd have a kid (hospital bill), something around the house would break, car would need repair, etc etc. We had a peak of $50k in savings right before our oldest son was born, and it took about 3 years for us to get back above that number. Repairs, having kids and buying a bigger car for her all kept us from socking anything away the past 3 years (apart from 401k and Roth).

I feel like we live simpler than almost all of our friends and family. We don't wear expensive clothes, we don't typically eat at nice restaurants, we don't take lavish vacations, we live in the smallest house of our friends and family, and we don't drive new cars. I wish we didn't need to pay for health insurance, that's a ton of wasted money IMO. I also don't know how a family of 4 can keep the grocery bill under $500 a month (including toiletries and whatnot) unless you eat no meat and ramen noodles every day. I don't feel like we eat nice food, but I'm open to ideas. It makes me sick to my stomach sometimes seeing how much we are spending, and some days I wish I was single and living in a shack eating ramen every day.

So this was our budget before. Today I can tell you that some leaks come from eating out, buying more clothes than we used to, groceries, and all the other stuff I listed (mother's day out, housekeeper, babysitters). I'll try to add up the actual expenses the past few months and post them here this weekend.

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #22 on: October 24, 2014, 09:02:38 AM »
hoded, it sounds like you're on top of it with all the tax stuff. A few other tax notes - the SE rate is closer to 14% because you get to deduct the employer portion, it might be a good idea to open a SEP-IRA to get back down into the 15% bracket, and good move on going to S-Corp but just make sure she always takes a reasonable wage (I would shoot for at least 50% of the profit just to be sure) since the IRS does not like S-Corp owners avoiding SE tax via taking low wages.

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #23 on: October 24, 2014, 09:03:04 AM »
She MUST track her expenses or else she is spending YOUR money not the businesses money. She wouldn't spend thousands of dollars every month throwing parties at your house for friends taking money away from her kids college savings so the Business must do this. She has no income until she tracks expenses. Start budgeting your entire house and make a category for business expenses and create a manila folder at home and in her car for her to throw in every receipt.

Yeah I made manila folders for every month and told her to put all her receipts in there each month. However, I know there's stuff she's forgotten to put in there, and I can't track her mileage for her. We're trying...

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #24 on: October 24, 2014, 09:05:57 AM »
hoded, it sounds like you're on top of it with all the tax stuff. A few other tax notes - the SE rate is closer to 14% because you get to deduct the employer portion, it might be a good idea to open a SEP-IRA to get back down into the 15% bracket, and good move on going to S-Corp but just make sure she always takes a reasonable wage (I would shoot for at least 50% of the profit just to be sure) since the IRS does not like S-Corp owners avoiding SE tax via taking low wages.

Thanks for the heads up on the reasonable wage. I'm sure the CPA would keep us from driving into a pothole but it's always nice to know yourself. And yes, come November or December I'm gonna try to get a rough estimate of the taxes and cash flow and look into a SEP-IRA to get us under $72k if possible.

I'm not an accountant but I do work for an accounting software firm, and my boss is a CPA. So I've absorbed some things over the years.

hodedofome

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #25 on: October 24, 2014, 09:15:01 AM »
Also, multi-level marketing? Glad she's making money, but those schemes make my skin crawl.

Yeah I did Advocare in college and realized I was a horrible salesperson. Most of them are ridiculous with the prices they charge for the product. This one is reasonable IMO, and it's girly stuff (Jamberry - stick-on nail wraps in all sorts of colors and designs). I might have sold $40 total worth of product during my Advocare days, my wife has been doing it less than a year and has 600+ girls under her and her team sales are well over $100k a month, just crazy.

Cheddar Stacker

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Re: High Spending vs Killing Yourself on the way to FI
« Reply #26 on: October 24, 2014, 09:16:07 AM »
hoded, it sounds like you're on top of it with all the tax stuff. A few other tax notes - the SE rate is closer to 14% because you get to deduct the employer portion, it might be a good idea to open a SEP-IRA to get back down into the 15% bracket, and good move on going to S-Corp but just make sure she always takes a reasonable wage (I would shoot for at least 50% of the profit just to be sure) since the IRS does not like S-Corp owners avoiding SE tax via taking low wages.

Thanks for the heads up on the reasonable wage. I'm sure the CPA would keep us from driving into a pothole but it's always nice to know yourself. And yes, come November or December I'm gonna try to get a rough estimate of the taxes and cash flow and look into a SEP-IRA to get us under $72k if possible.

I'm not an accountant but I do work for an accounting software firm, and my boss is a CPA. So I've absorbed some things over the years.

The $550/month health insurance for wife and kids can be deducted at the bottom of page 1 of your tax return, pre AGI. SE Health Insurance. It won't reduce the SE income, but it reduces AGI and taxable income, so you might still be in the 15% bracket.

Also, someone else mentioned previously the Childcare credit. Page 2 near the foreign tax credit, 20% of all childcare (and preschool) costs up to $3K/kid, so it's a net $1,200 back. You can take this as long as you both earn at least $6K.

Other than that, the only glaring weakness I see in your budget is the grocery bill, but that's roughly what ours is also. I know I could knock it down much lower if I did all the shopping, but I don't. There are many healthy things that are dirt cheap, but they aren't convenient/easy so it's not what my wife buys.