Author Topic: How do I get off this financial hamster wheel?  (Read 16832 times)

megandersonpdx

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How do I get off this financial hamster wheel?
« on: August 21, 2013, 03:12:26 PM »
My story:
I am a married mother of two preschool children living in Portland, OR. I work full-time ($72k/yr), as does my husband ($80k/yr). Our children are in daycare full-time to the tune of $1985 a month (would be $1885 if my son would just learn to use the potty!).

We also own two--count 'em, two--houses. One, we live in ($2100 mortgage); one, we rent out ($1200 mortgage mostly offset by $960 rent). We got into this situation by needing (wanting?) a larger house; we now rent our first, smaller house and live in the larger house.

We own two cars, which are both paid off. We both bike to work 1-2x a week, when we aren't doing daycare transport. We go out to dinner only twice a month and generally live frugally. However, we seem to barely be getting by sometimes.

My question is this: How do we get out of this hamster wheel?? I feel as though we are working our butts off to pay for daycare and two houses, not spending enough time with our amazing children, and are often unhappy in our marriage because stress gets the better of us. (In related news, we spend $175 every two weeks on couples counseling.)

My dream is to become a freelance writer/blogger/editor. I have a journalism degree, and made a partial living freelancing as an instructional writer and editor for 6 months before giving it up for a stable job with benefits (I returned to full-time work in March). I made anywhere from $60 to $80 an hour (pre-tax) as a freelancer.

I long to spend more time with the kids and have more flexibility to get stuff done during the daytime hours. My heart breaks a little each time I leave the kids at daycare, and it's killing me that we got ourselves into this situation. Our precious time with them can be so hectic that we are unable to appreciate it.

My question: Is there some way out of this rat race that will not cost us our home or security? Is it worth it to jump ship and live incredibly frugally in order to have less stress and more family time? I feel as though I am living in complete opposition to my values--help!

Thank you,
Pity Party in Portland

Numbers Man

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Re: How do I get off this financial hamster wheel?
« Reply #1 on: August 21, 2013, 03:16:38 PM »
Not enough information to give you more details. But it gets better when the kids hit 4th or 5th grade when you can cut down on daycare. But you should sell your first house since you are spending more than you are making.

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #2 on: August 21, 2013, 03:19:02 PM »
Thanks Numbers Man. What details would help?

My kids are 19 months and 3 years.

JohnGalt

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Re: How do I get off this financial hamster wheel?
« Reply #3 on: August 21, 2013, 03:27:49 PM »
My question: Is there some way out of this rat race that will not cost us our home or security? Is it worth it to jump ship and live incredibly frugally in order to have less stress and more family time? I feel as though I am living in complete opposition to my values--help!


A -$300+ (probably way more in the long term if you factor in vacancies/repairs) rental + a $2100 current mortgage is certainly not going to make it easy to lower your income and still save.  I'd suggest finding a way out of the rental ASAP is likely to be step 1. 

A full financial picture (full budget, current assets/debts) would probably let people help make specific suggestions but its essentially going to boil down to taking a look at everything you spend money on and deciding whether or not it is worth working for it.  It should certainly be possible for you to cut your expenses enough that you can live off of one income so that the other can stay home with the kids and start a side hustle - if you prioritize it.  In the end, both houses may need to go to do it - but it really will just come back to your priorities. 

brewer12345

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Re: How do I get off this financial hamster wheel?
« Reply #4 on: August 21, 2013, 03:31:14 PM »
Thanks Numbers Man. What details would help?

My kids are 19 months and 3 years.

Sounds like the houses and daycare are the anvils around your necks.  Do you have equity in the properties at today's market values?

Numbers Man

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Re: How do I get off this financial hamster wheel?
« Reply #5 on: August 21, 2013, 03:31:53 PM »
Question all your expenses. Always look for ways to get better at cutting expenses. Save a lot. Take advantage and max out  your 401k, 403b, etc plans at work. This move will lower the amount of taxes you pay.  Don't fall for the talk about quitting your job because daycare is so high. You should continue with your career trajectory and you will eventually be making more money. Read Mr. Money Mustache's posts. I don't want to re-create the wheel.

ChiStache

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Re: How do I get off this financial hamster wheel?
« Reply #6 on: August 21, 2013, 03:37:15 PM »
I'm sure folks would be happy to help and that you'd receive some valuable feedback if you post your monthly budget as well as a description of your assets and liabilities (retirement balances, student loan balances, etc.) With those incomes, you should not be living paycheck to paycheck.

EK

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Re: How do I get off this financial hamster wheel?
« Reply #7 on: August 21, 2013, 03:45:18 PM »
What about selling your current bigger house and moving back into the smaller one?  You mentioned in the first post that maybe you didn't really NEED the extra space...

Post your typical monthly budget and you'll get a lot of specific advice on where to cut.

brewer12345

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Re: How do I get off this financial hamster wheel?
« Reply #8 on: August 21, 2013, 03:45:52 PM »
Question all your expenses. Always look for ways to get better at cutting expenses. Save a lot. Take advantage and max out  your 401k, 403b, etc plans at work. This move will lower the amount of taxes you pay.  Don't fall for the talk about quitting your job because daycare is so high. You should continue with your career trajectory and you will eventually be making more money. Read Mr. Money Mustache's posts. I don't want to re-create the wheel.

So she should stay on the wheel and just run faster?  Ugh.

Another way is to cut your fixed expenses enough that you quit teh day job, take the kids out of day care, and figure out a small business that can generate extremely tax favored income that all gets routed into savings.  That is what DW and I have done for the last decade and it has worked well.

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #9 on: August 21, 2013, 03:51:48 PM »
THanks all.

As for equity:
House 1 (where we live): We owe around $324k and it's worth $360k, per Zillow. We bought it for 375 in 2008.
House 2 (rental): We owe 190k, and it's worth around 195k. My husband boug totaling around $15k.

I have attached our WEEKLY budget. We use https://www.eebacanhelp.com/. Some of the numbers are really low because they are spread over a year.

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #10 on: August 21, 2013, 03:54:23 PM »
Also, we have about $250,000 in 401ks/IRAs. We recently  cut our contributions to have more money in the bank.

We have virtually no debt, aside from owing $2500 on the credit card right now. <sigh>

Incidentally, we are both in our late 30s.

fidgiegirl

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Re: How do I get off this financial hamster wheel?
« Reply #11 on: August 21, 2013, 03:56:21 PM »
Question all your expenses. Always look for ways to get better at cutting expenses. Save a lot. Take advantage and max out  your 401k, 403b, etc plans at work. This move will lower the amount of taxes you pay.  Don't fall for the talk about quitting your job because daycare is so high. You should continue with your career trajectory and you will eventually be making more money. Read Mr. Money Mustache's posts. I don't want to re-create the wheel.

So she should stay on the wheel and just run faster?  Ugh.

Another way is to cut your fixed expenses enough that you quit teh day job, take the kids out of day care, and figure out a small business that can generate extremely tax favored income that all gets routed into savings.  That is what DW and I have done for the last decade and it has worked well.

Curious, what is said business?

brewer12345

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Re: How do I get off this financial hamster wheel?
« Reply #12 on: August 21, 2013, 04:02:51 PM »
Question all your expenses. Always look for ways to get better at cutting expenses. Save a lot. Take advantage and max out  your 401k, 403b, etc plans at work. This move will lower the amount of taxes you pay.  Don't fall for the talk about quitting your job because daycare is so high. You should continue with your career trajectory and you will eventually be making more money. Read Mr. Money Mustache's posts. I don't want to re-create the wheel.

So she should stay on the wheel and just run faster?  Ugh.

Another way is to cut your fixed expenses enough that you quit teh day job, take the kids out of day care, and figure out a small business that can generate extremely tax favored income that all gets routed into savings.  That is what DW and I have done for the last decade and it has worked well.

Curious, what is said business?

DW is a career counselor by trade.  She did this as an employee for several years and then made the leap to private practice.

smalllife

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Re: How do I get off this financial hamster wheel?
« Reply #13 on: August 21, 2013, 04:16:48 PM »
I took the liberty of translating your numbers into monthly amounts so we can get a grasp on spending.  Weekly amounts are hard to judge.

FOOD   
Groceries          758
eating out   87
bill lunches   52
meg lunches   35
meg coffee   35
misc food           22
   
KIDS   
diapers, sunglasses, etc.   87
activities                           43
daycare                           2000
babysitter                   67
swim lessons                   42
   
CAR   
gas                                  238
auto service/reg          67
insurance                          100
   
entertainment                  52
gym                                  91
   
HOME   
mortgage    3389
supplies           42
improvement   167
services            21
   
SHOPPING   
gifts               42
kids toys      17
books, magazines   12
software/domain   8
   
UTILITIES     
utilities - city   80
PGE                   192
Straight Talk   45
Waste Management   28
NW Natural   30
Comcast           75
Water           96
Verizon           83
   
Clothing                           42
Haircuts/personal Care   50

My comments to follow in another post so it's easier for others to copy the monthly expenses.

smalllife

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Re: How do I get off this financial hamster wheel?
« Reply #14 on: August 21, 2013, 04:26:45 PM »
What makes you think that you can't cut anything? This does not seem like you have so much as looked at your budget critically other than to make a post here.  Great starting point, but actually paying attention to your expenses is the only way you are going to get off the hamster wheel. 

FOOD   
Groceries          758     You can easily get this down at least a hundred dollars. New budget $600 and see if you can make it.
eating out   87
bill lunches   52
meg lunches   35
meg coffee   35
misc food           22
  You are spending $231 per month on lunches and coffee . . . pack your lunches and make the coffee at home.  Bam, $200 extra dollars.
   
KIDS   
diapers, sunglasses, etc.   87
activities                           43
daycare                           2000
babysitter                   67
swim lessons                   42         Seems reasonable to me, but I have no personal baseline for comparison.
   
CAR   
gas                                  238     Both of you bike to work 1-2 days per week, how the hell is this so high?  If you can bike that much the distance can't be that far.  Huge gas guzzler, lots of weekend trips?  I think you could shave this quite a bit.
auto service/reg          67
insurance                          100
   
entertainment                  52
gym                                  91     Take one month's gym membership and buy some weights.   How often do either of you make it to the gym - is it worth the membership?
   
HOME   
mortgage    3389    Already been mentioned to sell one house as the rental is not making you any money.
supplies           42
improvement   167
services            21
   
SHOPPING   
gifts               42
kids toys      17
books, magazines   12
   There is so much free entertainment out there that this can seriously just be dropped off the budget.  Go to the library, get durable used toys from Craigslist, etc.
software/domain   8
   
UTILITIES     
utilities - city   80
PGE                   192
Straight Talk   45
Waste Management   28
NW Natural   30
Comcast           75
Water           96
Verizon           83                    I feel like I'm missing something - what is PGE and why do you have Straight Talk, Comcast, AND Verizon?  These all look really high to me anyway, but it's hard to tell with regional price differences.  Check out the posts on cutting your energy costs, it's not that hard.
   
Clothing                           42
Haircuts/personal Care   50


I just found a quick $475 per month just by glancing at the expenditures and not really stretching the frugal muscles.  Once you do that, tackle the utilities and sell one of the houses you will be in great shape!  With $250,000 in investments and no non-mortgage debt that is a solid starting line. 

EK

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Re: How do I get off this financial hamster wheel?
« Reply #15 on: August 21, 2013, 04:27:46 PM »
You can probably save a lot on food.  You're spending around $1000 / month!!  You can see big savings with some effort in that category.

You spend a lot on gas.  Where do you drive to burn all that gas?  Is there another way to get around?

Do you need the gym membership?

Whatever PGE is it seems like a lot?

Verizon and Comcast you could try to trim back.

The houses and the daycare are obviously the biggest though.  For the houses, that money-losing rental is awful.  If it were me I would try to sell it ASAP.  Even if you do nothing about the daycare situation, the kids will eventually go to school and eventually you won't be putting out that kind of money every month....

brewer12345

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Re: How do I get off this financial hamster wheel?
« Reply #16 on: August 21, 2013, 04:35:24 PM »
Looks to me like you could cut about 500 from the budget.  Sell the more expensive house, move into the rental, take the kids out of daycare and quit your job.  BAM!

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #17 on: August 21, 2013, 04:45:47 PM »
Thanks all.

PGE is Portland General Electric ... THat cost is an average over a year--less in the summer. Also, we have a hot tub (don't laugh) which sucks up some energy.

This feedback is actually exactly what I needed. Believe it or not, I thought I'd trimmed that budget down, but it seems others have found ways to trim it down further.

I think my mentality is not quite yet mustachian--closer to stubble, as my profile says. For example, I think I "deserve" my coffee out because I work so hard. At the same time, that luxury is pushing me farther away from my goals.

 I am new to this forum (long-time MMM reader) and am so impressed with how much attention you all pay to the posts--it's really helpful and much appreciated!!

Thanks,
Meg

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #18 on: August 21, 2013, 04:47:57 PM »
Regarding THE GYM -- I swim with a masters team there, and it is a big part of maintaining my sanity. I can't find a much cheaper way to swim with a team.

Regarding UTILITIES -- Verizon is the cell phone for hubby; StraightTalk is mine; Comcast is the internet. We have no cable TV.

TrulyStashin

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Re: How do I get off this financial hamster wheel?
« Reply #19 on: August 21, 2013, 04:49:20 PM »
Sell the big house and move back to the little one.  Your kids are little, they won't care.  They're not in school yet so that's not an issue.  Savings $2100 plus lower utilities.

Cut your food budget in half.  Savings $400 +/-

Quit the gym.  Savings $91.

That's THREE GRAND a month + which is a solid chunk of money going toward FI each month.  I'm sure there's more once you get rolling...........

EK

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Re: How do I get off this financial hamster wheel?
« Reply #20 on: August 21, 2013, 04:53:14 PM »
Regarding THE GYM -- I swim with a masters team there, and it is a big part of maintaining my sanity. I can't find a much cheaper way to swim with a team.

Regarding UTILITIES -- Verizon is the cell phone for hubby; StraightTalk is mine; Comcast is the internet. We have no cable TV.

You are paying more than $120 per month for cell phones!!!  Check out the super guide:  http://www.mrmoneymustache.com/forum/share-your-badassity/communications-tech-isps-voip-cell/

If PGE is electric, and you also pay water, what is the $80 utilities item??

psychomoustache

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Re: How do I get off this financial hamster wheel?
« Reply #21 on: August 21, 2013, 05:08:30 PM »
Welcome to you! I've been here myself about six months and yes - mustachianism can be intense.

I jumped in right away and got in over my head (all gung-ho -didn't last) but now I think that it's important to find your way with all this information and start making the changes (step-by-step) in a way that feels personally For YOU.

Even stopping the coffee-outings are going to feel, at first, enormous. But it is so gratifying. MMM said in one of his posts - "every time you say 'no' to a purchase - think it's like someone paying *you* that same money, back to you" (I paraphrase). This has helped me a lot. I make a lot of money this way, LOL.

If I could, I'd sell the house we live in (feels way too big to me) and we'd all eat only beans or the equivalent. But I have to work with my familiy too. Mostly they have gone along with the changes, sometimes they kvetch. (Complain). Whatever - I would say, pace yourself, and talk to Bill about the forum too.

Glad you're here : )

Eric

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Re: How do I get off this financial hamster wheel?
« Reply #22 on: August 21, 2013, 05:09:27 PM »

Regarding UTILITIES -- Verizon is the cell phone for hubby; StraightTalk is mine; Comcast is the internet. We have no cable TV.

$75/mo for internet is ridiculous.  Look up internet specials from your local Comcast competitor.  Call Comcast and tell them that's you're going to switch unless they can match said offer.  I guarantee you'll be paying at least $20/mo less for the next 12 months for 2 minutes on the web and a 10 minute phone call.

SMMcP

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Re: How do I get off this financial hamster wheel?
« Reply #23 on: August 21, 2013, 05:16:50 PM »
Take a close look at what your true take home pay is after taxes, child care, clothes for work, commuting and other work related expenses. Then look at what you could save by being home more (less convenience food, reduced need for stress reduction activities, etc.) I believe that one spouse devoted to domestic activities provides true economic value to a family. Don't fail to consider the non-economic value of staying home with your children. It might make sense to put your journalism degree to work earning money from home.

seattlecyclone

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Re: How do I get off this financial hamster wheel?
« Reply #24 on: August 21, 2013, 05:21:12 PM »
Many of your categories look like they could be cut some. You're spending almost $100k/year. Most families don't even have that option, so clearly there's some room to cut.

Groceries: $750/month is high. That's over $2/person/meal. See this MMM post for some ideas for how to reduce this cost. The key is to use inexpensive base ingredients for most of your caloric requirements, and use reasonable quantities of more expensive ingredients to keep the meals interesting.

Gas: $238/month. With gas at about $3.75/gal, that's about 63 gallons of gas per month. If you drive a car that gets 30 MPG, that's about 1,900 miles per month, or over 22,800 miles per year. That's a lot! If you have a less fuel-efficient car than this, sell it now and buy a more reasonable automobile. Then look for ways to reduce your driving, such as by walking, biking, or taking public transit. Portland has a pretty nice transit system, you should try using it sometimes. If a lot of this driving is to and from work, look into moving closer to the office.

Auto insurance: $100/month is on the high side. We pay about $25/month, but that's only for a single car. Look into increasing your deductibles and eliminating unnecessary coverage, and getting quotes from competing companies.

Gym: $91/month is expensive. Try cutting this expense entirely and switching to less expensive forms of exercise (such as biking, running, buying a set of weights for the basement, etc.).

Mortgage: Sell one of your houses. The rental income isn't enough to be worth holding on to a second house. You would probably not free up a significant amount of cash by doing this since you owe about as much as the house is worth, but cutting $300/month out of your expenses (or $1000 if you decide the smaller house is big enough for you after all) is a big win.

Utilities: these seem high. For comparison, my average monthly utility bill (for a small house in Seattle) is the following:
Internet: $50
Water/sewer: $55
Garbage: $20
Electricity: $25
Natural gas: $45 (mostly in the winter for heat)
My cell phone (T-Mobile pay-as-you-go): $5
Wife's cell phone (Virgin Mobile): $25
All told, this is about $225/month, just a little more than you pay in a week for utilities. Find out where your utility dollars are going. Save where you can. Use less electricity, turn the thermostat down in the winter, find a lower-cost cell phone provider, see if you can downsize your trash service, etc. There's lots of room for improvement here.

Haircuts: there looks to be room for improvement here as well. Though I haven't gone full Mustachian and started giving myself buzz cuts, I still only spend about $20 every two months on a haircut from a local barber. My wife spends even less than this, going to Great Clips to have them chop off a foot of hair when it gets too long.

I haven't addressed child care yet. Your current job pays you more than job-related expenses (child care, commuting costs, occasional lunches out, etc.), so you may not see a financial benefit to quitting work. However, you do say that having two full-time jobs in the family is causing undue stress, and that your dream is to do freelance writing. If you cut some of the expenses above, you could probably afford to give that a try! This is especially true if you think you could drop the daycare expense when you start freelancing.

This sounds like a lot, and it is. That's fine. Take things one step at a time, and you'll be saving lots in no time!

imustachemystash

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Re: How do I get off this financial hamster wheel?
« Reply #25 on: August 21, 2013, 05:27:05 PM »
Eva is right.  It might sound crazy but really consider selling your bigger house and move back into the smaller one.  We decided to stay in our 1300 square foot condo with our 2 preschoolers.  It's awesome!  We never fight about money and I get to work part time.  We also have less stuff around and rarely need to acquire new stuff.  You will be able to save so much more money and can get out of the rat race. 

kkbmustang

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Re: How do I get off this financial hamster wheel?
« Reply #26 on: August 21, 2013, 05:46:50 PM »
I'll speak to your point about being a freelance writer. I am a recovering attorney turned freelance writer. My kids are older (8 and 10) and I quit working FT for medical reasons, but my family is much happier now. I am able to work while they are in school, which wouldn't be an option for you for a while. But, you could hire a part-time sitter for a lot less than $2000/mo (or work while your husband is home or the kids are asleep, etc.).

I'm assuming you could piggy back on your husband's medical benefits.

If you cut your expenses as others have suggested in addition to the childcare, while still bringing in some income from freelancing, I'd imagine you would have good odds at getting the numbers to work.

If you want resources for building a freelance writing business, check out Peter Bowerman of the Well Fed Writer or Carol Tice of Make a Living Writing.

frugaldrummer

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Re: How do I get off this financial hamster wheel?
« Reply #27 on: August 21, 2013, 05:51:41 PM »
Another way of looking at it:

You make 72k per year.  The average federal  income tax rate on your portion of the income probably comes out to 20% (roughly).  Add in other withholding, so let's say you are taking home 57k/yr or $4,750 per month.

Subtract childcare - 4750 minus 1885 (he'll be potty trained soon enough) = 2865

Sell the big house and move back into the smaller one - 2100 mortgage savings minus tax break that you were getting on mortgage interest = 1700 savings = 2865 minus 1700= 1165 that still needs to be made up.

1165 minus 350/mo marriage counseling = 815

Reduced grocery costs due to you being able to cook at home, less stress impulse buying etc, not eating lunch/coffee out - $300 savings.  815-300 = 515

If you freelanced for $60/hour, 10 hours a month, you could make up that last bit easily.  Plus remember you would have about $20k extra cash from selling the bigger house.

HOWEVER - I am going to insert a couple of precautions.

 - I was a stay at home/ part time worker when my kids were little.  I thought it was a joint decision that my (ex) husband and I made.  He however came to resent it and it definitely played some part in our ultimate divorce.  He didn't respect the hard work of mothering, and didn't like saying he was married to a SAHM instead of a professional woman. 

 - similarly, I mommy-tracked my career for the sake of the family - now I am divorced and earning about half as much as I would have if I'd kept up my career during the marriage.  If you guys are in counseling, this may not be the best time to give up your job.

 - don't assume things will be easier or you will be less stressed at home - it's the hardest job I ever did, working was easier.

 - you mentioned benefits - is your job the one that provides benefits?  If so, how much will it cost to replace those benefits?

lhamo

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Re: How do I get off this financial hamster wheel?
« Reply #28 on: August 21, 2013, 05:56:16 PM »
Re:  coffee as a treat.  Try a bridge withdrawal strategy.  Buy yourself a nice French press and (if you really want to go all out) a grinder (try to find second hand, shouldn't be hard).  Buy some nice beans to take to work.  When you feel that urge to go out for coffee, make yourself a nice one instead.  You'll have a bit of upfront cost, but will save a lot in the long run.

While it is challenging with two working parents, potty training your kids would save you nearly $200/month in diapers and extra child care costs.  I would put some extra time/energy into researching strategies here and try to speed up the process a bit.  Don't buy the whole "if we push it they will have psychological issues" business.  There are ways to make it fun/less stressful for both parents and kids. 

Food budget can definitely be cut.  Where do you shop now?  what kinds of foods do you buy?  Do you have dietary preferences/needs that need to be taken into account?  Give us more input and we can help you develop strategies to keep the cost down.

Definitely sell one of the houses.  Personally I'd sell the big one and move back into the small one, but there may be other factors you need to consider (schools, length of commute, overall quality of life in the neighborhood, etc). 

Re:  wish to work at home, it is really hard when you have a full time job and young kids, but can you carve out even a few hours a week to work on freelance projects, and start building a side business back up?  When you were making $60-80/hour freelancing, how much were you typically able to work a week?  One of the challenges with freelancing is you have to pay all your own self employment taxes, and that really cuts into take home.  But if you were able to work 20 hours a week consistently, get rid of the child care costs, and spend at least some of your non-working-for-income hours doing things that bring your budget down further (cost-conscious shopping and cooking, looking for second hand goods rather than buying new when you have a need, etc), you might actually be better off financially, at least while the kids are so young and childcare costs are so high.  Don't see any way you can do this while you still have both houses, though. 

Argyle

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Re: How do I get off this financial hamster wheel?
« Reply #29 on: August 21, 2013, 10:24:35 PM »
Since you're paying so much in childcare, you might look into getting an au pair instead.  The cost is high for one child but for two can work out quite economically compared to a childcare facility.  Here's some Wikipedia info: http://en.wikipedia.org/wiki/Au_pair#United_States.  I hear that what you're really wanting to do is to quit your job and go freelance, but an au pair is just another option.  On the freelance angle, they always say that you should build up your freelance business first, and when it's at a sustainable level, then quit.

Blindsquirrel

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Re: How do I get off this financial hamster wheel?
« Reply #30 on: August 21, 2013, 10:53:01 PM »
   The rental is not an investment, it is a cash sucking leech on your finances. Either raise the rent to where it is at least cash flow positive by +35% over PITI or loose that puppy asap. Unless houses are going up in price a boat load in your market, your loss will only widen as the years go on. Do not continue to feed the alligator. Just my 2 cents. That alone will free some cash, reduce your stress, etc.

MountainFlower

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Re: How do I get off this financial hamster wheel?
« Reply #31 on: August 22, 2013, 09:52:30 AM »
Potty Training.  What a joy!  What a cost savings!  For my kids, they got to go to the bigger room with the bigger kids when they were potty trained.  What a motivator it was for them!  Also, our preschool will let them come over even if they aren't perfect.  once they are around the bigger kids, they usually improve dramatically. 

I liked the book Stress Free Potty Training.  It helps you identify what your child's personality is and how to tailor potty training to their personality.  I loved the personality test.  It has really helped me understand my kids better.   

Finally, my kids wouldn't go to the bathroom for stickers...but add chocolate in the mix and they were ready to go!  My husband was worried that we'd have to give them chocolate for the rest of their lives with this approach, but eventually, they just forget about it. 

kkbmustang

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Re: How do I get off this financial hamster wheel?
« Reply #32 on: August 22, 2013, 10:20:41 AM »

Finally, my kids wouldn't go to the bathroom for stickers...but add chocolate in the mix and they were ready to go!  My husband was worried that we'd have to give them chocolate for the rest of their lives with this approach, but eventually, they just forget about it.

M&Ms work great. Small, so less sugar. But, chemicals in the dye. Maybe Hershey Kisses?

ChiStache

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Re: How do I get off this financial hamster wheel?
« Reply #33 on: August 22, 2013, 10:38:25 AM »
This is interesting to me. You have good retirement savings, no consumer or SL debt, but you still seem uneasy. Given your finances and the emotional consideration that seem to be in play, I have this advice: Open a money market account at Vanguard. Make it a goal to transfer $500 a month to that account (using all the great budgeting advice on this thread). Then, once you get to $3,000 talk with one of their advisors about investing it. In just five years, you'll have about $30,0000 in there.  Having a nice taxable account like that -- which you can readily access in case of emergency or if you wanna start a business -- might give you the piece of mind you need.

Iron Mike Sharpe

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Re: How do I get off this financial hamster wheel?
« Reply #34 on: August 22, 2013, 11:16:16 AM »

HOWEVER - I am going to insert a couple of precautions.

 - I was a stay at home/ part time worker when my kids were little.  I thought it was a joint decision that my (ex) husband and I made.  He however came to resent it and it definitely played some part in our ultimate divorce.  He didn't respect the hard work of mothering, and didn't like saying he was married to a SAHM instead of a professional woman. 

 - similarly, I mommy-tracked my career for the sake of the family - now I am divorced and earning about half as much as I would have if I'd kept up my career during the marriage.  If you guys are in counseling, this may not be the best time to give up your job.

 - don't assume things will be easier or you will be less stressed at home - it's the hardest job I ever did, working was easier.

 - you mentioned benefits - is your job the one that provides benefits?  If so, how much will it cost to replace those benefits?

This section is going to be the key.  The others have good suggestions on where to start saving money.  But, you need to be 100% certain that your spouse is on board with whatever changes you are wanting to make.  Is he on board with living a more mustachian lifestyle.  If you already have cracks in the foundation of your relationship, major changes could do more harm IF he is not on board.

With your husband's salary and the money you could make freelancing, if you make many of the changes others have suggested, things should be able to work for you.  The key is that you are both on the same page.

SunshineGirl

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Re: How do I get off this financial hamster wheel?
« Reply #35 on: August 22, 2013, 11:22:02 AM »
I would caution against quitting a job when you have marriage problems. No one here is prepared to say whether your marriage will or won't last, and it would not be good to be income-insecure if you ultimately don't stick together.

I second the idea of selling one of the houses, preferably the new one since you'd clear some money from it and enable you to have lower expenses in the smaller home.

The daycare expense is high, but as others have said, it won't be forever.

I know money is supposed to be the greatest cause of marital stress - if that's the case in your situation - you can solve it! You've just got a few big decisions to make jointly with the goal of simplifying your finances to clear out that stress.

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #36 on: August 22, 2013, 11:35:08 AM »
THANKS to everyone! I wish i could reply individually to many of you, but I am at work and would like to get SOME work done!

I agree with the latest posts about putting my marriage first. I'm trying to streamline and reduce the amount of "stuff" in our lives in an effort to reduce the stress, and ideally, allow us more time together. Everything I've discussed (freelancing, quitting, selling the house, etc.) I have discussed with my husband. He is onboard with whatever will reduce our stress.

Unfortunately, he is reluctant to let the rental go. We'd barely break even by selling it, and he hopes to get the rental income up to the cost of the mortgage.

We have jokingly discussed moving back there with the kids. The house is SMALL (1100 sq ft) and in the suburbs. There is no yard, and when we left, the neighbors were difficult. Our house now is in a great location with a huge yard and decent schools. The only benefit to moving back there would be the money--a benefit that might easily be offset by the stress of living in a less-than-ideal neighborhood and house.

The market here is great--houses are getting bids for over asking price. Would it make any sense to sell both houses and move to a smaller (not as small house as the rental) house in an OK area?

Thanks again, everyone. Love this forum!


tomsang

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Re: How do I get off this financial hamster wheel?
« Reply #37 on: August 22, 2013, 11:43:23 AM »
Thanks Numbers Man. What details would help?

My kids are 19 months and 3 years.

First off take a deep breath and realize that you are going through the hardest and some of the most expensive ages of raising kids.  The frustrations and costs will drop significantly in the coming years.  As my father said, "There are times to swim and there are times to keep your head above water"  I think, you are in a stage of life where your goal is to keep your head above the water, while planning for the swim.  Within 6 months you will save $100/month for childcare for a potty trained child, plus you will save on diaper costs. In two years, you will have one kid in preschool, saving additional money. If you and your husband are doing well with your jobs there will be a raise or two in that time frame. You have been saving in your 401k, you have limited debt, and it sounds like you have a great family.  So you are doing great. 

The items to reduce costs mentionend above are great.  I would take on the ones where you are not getting value and eliminate those.  I would not make drastic changes to employment or even selling the house until you have a good plan of what you are doing. 

What is the interest rate of the houses that you have?  When was the last time you raised rents?  If you have a 30 year fixed rate loan, do you know the value of this loan?  You should calcuate the NPV on the loan.  If you sell your house at a loss, you are losing on the sale of the asset, but you may also be losing on the value of the 30 year fixed loan if the loan is a low interest rate. 

Again, I think this is the time to keep your head above the water.  It sounds like you are there, with a few waves touching your lips every once in awhile.  Within a few years, you should be sitting in a lounger on the boat.

Good luck!

NumberCruncher

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Re: How do I get off this financial hamster wheel?
« Reply #38 on: August 22, 2013, 11:54:09 AM »

Unfortunately, he is reluctant to let the rental go. We'd barely break even by selling it, and he hopes to get the rental income up to the cost of the mortgage.


Even if the rent covered the mortgage, there's still taxes, insurance, hassle, repairs/upkeep...really make sure to run the numbers and make sure you don't fall for the sunk cost fallacy: http://www.obliviousinvestor.com/sunk-costs-and-underwater-mortgages/

There are tons of landlords on this forum that talk about what makes a good rental unit, and from what you've told us, this is just a money suck.

Forcus

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Re: How do I get off this financial hamster wheel?
« Reply #39 on: August 22, 2013, 12:59:52 PM »
Just a thought, you are doing pretty damn well compared to the average American family of your age. With a few changes you could be pretty kick ass. I think brewer had the most succinct plan - sell the expensive house, get your freelance thing going, then quit your main job and pull the kids out of day care. Honestly I kind of envy your position so even though it sucks sometimes, you are in a great position to simplify your life and move forward.

tomsang

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Re: How do I get off this financial hamster wheel?
« Reply #40 on: August 22, 2013, 01:29:20 PM »
Transaction costs are a killer for real estate.  Time is your friend.  If you have a low 30 year fixed mortgage then with time this will become your best investment.  Currently you have 0 or negative equity.  If the housing increases 6% for the next few years, then you are sitting pretty well even with subsidizing this house for a year or two. 

Instead of taking a $15,000 cash loss ($190k sales price minus $19k closing costs and fees-$190k mortgage) by closing out the rental, I would take the $5k a year loss.  If housing continues to increase in value over the next few years, then your $190k house is worth $225k your mortgage is $185k.  You go from losing $15k to making $17k, for a $32k increase in your stache! Our investors would not be willing to invest in a situation like this, but if they were already in this situation I would think a number of them would keep the rental unless there were some significant issues that were predicted to occur in the next few years.  When you have no equity or negative equity your return on investment can't be beat in a rising market.

Inflation is your friend when you have real estate and a fixed rate 30 year loan. What looked like a bad rental, looks pretty good after a handful of rent increases.     

Another Reader

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Re: How do I get off this financial hamster wheel?
« Reply #41 on: August 22, 2013, 01:41:43 PM »
If these folks were in better shape, I might agree with Tomsang.  However, the objections the OP raises about the rental house (no yard, bad neighbors) are objections tenants will raise as well.  They are already cash flow negative without considering operating expenses and vacancy.  If they got their expenses down and the OP wanted to continue to work to support the rental house, that would be one thing.  I think she wants not to work, and that means some sacrifices somewhere.  The spouse needs to understand this rental is making their lives more difficult.  Hoping to get the rent up to the mortgage payment is not a plan.  Something needs to give.

kdms

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Re: How do I get off this financial hamster wheel?
« Reply #42 on: August 22, 2013, 01:53:58 PM »

The market here is great--houses are getting bids for over asking price. Would it make any sense to sell both houses and move to a smaller (not as small house as the rental) house in an OK area?


This is what occurred to me as well as I was reading through the posts - the rental isn't pulling its weight, and it sounds like your current home isn't exactly your dream house, but the neighbourhood is or close to it.  Would your husband consider putting both homes up for sale, if you could find that 'just right' (Goldilocks just popped into my head as an analogy) home that's bigger than the rental, smaller than your current place (and ideally with a smaller mortgage to go with it) and in your current area or close proximity to it?  Even if you took a bit of a loss on the rental, you might make it up with the sale of your bigger house if everything in that area is selling for more than the asking price.



ZiziPB

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Re: How do I get off this financial hamster wheel?
« Reply #43 on: August 22, 2013, 01:59:01 PM »
The rental seems to be not only a black hole for money but also a source of frustration and stress.  So it's a drain both on the finances and also on the mental energy (which is probably in limited supply anyway with two full time jobs and two small kids).  The OP mentioned a desire to simplify and reduce stress.  I'd say, get rid of the rental and the hassle that goes along with it.

frugaldrummer

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Re: How do I get off this financial hamster wheel?
« Reply #44 on: August 22, 2013, 02:21:19 PM »
Ok, so the small house is not an option to move to, it sounds like.

Run the numbers for your H on the small house - add up the rent, subtract 1 month/year (estimated vacancy rate), subtract all your expenses, (including advertising costs for new tenants, repair bills, taxes and an estimated amount for long-term expenses - for instance, if your roof is 20 years old and likely to need replacement in ten years, add 1/10th the cost of a new roof to your annual expenses).  I bet once he sees what the TRUE monthly loss is, he'll rethink keeping it.

Rather than sell your current house and buy smaller (since interest rates are so low and housing prices are still kinda low, making the difference between your house and a much less nice house probably not that great) I'd suggest making the other reductions in expenses mentioned above, and selling off the rental.  Then do the math and figure out how much freelancing income you would need to come out even if you gave up preschool.

Also consider other alternatives like going part-time at your job? 

mustacheme

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Re: How do I get off this financial hamster wheel?
« Reply #45 on: August 22, 2013, 02:28:13 PM »
Regarding UTILITIES -- Verizon is the cell phone for hubby; StraightTalk is mine; Comcast is the internet. We have no cable TV.
[/quote]

You can probably negotiate Comcast down significantly.I have Comcast in the Portland area also. Two months ago I got a flier from another carrier for less. I called Comcast to cancel service, and they immediately matched rates with no ending period on that rate, and no contract.

Also, Portland is super bike friendly perhaps consider a MMM approach and zap the car usage.


tomsang

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Re: How do I get off this financial hamster wheel?
« Reply #46 on: August 22, 2013, 03:49:05 PM »
If these folks were in better shape, I might agree with Tomsang.  However, the objections the OP raises about the rental house (no yard, bad neighbors) are objections tenants will raise as well.  They are already cash flow negative without considering operating expenses and vacancy.  If they got their expenses down and the OP wanted to continue to work to support the rental house, that would be one thing.  I think she wants not to work, and that means some sacrifices somewhere.  The spouse needs to understand this rental is making their lives more difficult.  Hoping to get the rent up to the mortgage payment is not a plan.  Something needs to give.

I don't necessarily disagree with you, but if you want to get your financial house in order, you have to sacrifice in the short term for longterm success.  These guys are not a financial train wreck.  They just have two kids under 5.  Very stressful!  Selling a house and coming up with $15-20k to fund the house would be way more stressfull to me than to have a $240 a month draw on the rental. Get the kid out of diapers and you are half way to that landmark.

With the couple making $150k a year and expenses of like $98k and going down they have the ability to be in very good financial shape.

If they liquidate the house, how do they pay the $15k-$20k loss?  Visa, 401k loan, personal loan?  The monthly expense may be greater than the loss on the rental depending on the terms of the loan. Then you just have debt for the loss and no appreciating asset. 

With the market rebounding due to the market and inflation, this house goes from a $15k net loss to a $17k net gain in three years and gets you closer to being off the treadmill.

I think that financial stress is caused by not knowing what your plan is.  You are willing to sacrifice $200 a month if you can see the reward in the future.  To me this is like those who don't contribute to their 401k now because the future is so murky or so far away. They make a short term decision that impacts them significantly in the future.  You can deal with the pain if you see a positive outcome in the future.  The kids will become cheaper and easier to manage in the very near future.  Keep your head above the water and your problems will melt away.           

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #47 on: August 22, 2013, 04:07:06 PM »
I may ask before the end of the year if I can work here part-time. I know that I have awesome job security (barring some major financial collapse), so I don't think they would be willing to lose me. I'm hoping they would "Take what they can get" of my time.

As for biking, I already do 1-2 times a week, and I work from home once a week. September is local bike commute month, and I am shooting for 75% bike commute rate. That will get me a lot closer to mustachian if I can make it a habit. I even have a nice bike set up for the Pac NW winters.

I am going to talk to my husband about potentially selling the rental next summer. If anyone has any recommendations for contractors in Portland to do the updates (kitchen cabinets, other minor things), please advise! We are not handy people, unfortunately. :-/

megandersonpdx

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Re: How do I get off this financial hamster wheel?
« Reply #48 on: August 22, 2013, 04:10:02 PM »
Thanks Tomsang. Your thinking is along the line of my husband's as far as selling the house. When it comes down to it, we just can't pay out of pocket for anything major, such as new siding for the rental. Will need to see a value increase in the house in order to sell it, and I am hoping that happens next summer! It's already increase in value about 15k since the recession began a couple years ago.

TrulyStashin

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Re: How do I get off this financial hamster wheel?
« Reply #49 on: August 23, 2013, 06:04:59 AM »
If anything, you can takeaway from this thread the conclusion that there are no easy answers to your situation.  So, the next time you feel frustrated over the lack of clarity, just remember that despite all the collective wisdom of the Mustachians, the clouds did not part, no angels sang, and there was no sunbeam shining down on The Right Answer.  ;)   You're doing well and can do a little better and this hard stretch will not go on forever.

It will get easier when the oldest tot is in school.  Streamline as much as you can until then.  Prioritize free/ cheap activities with family & alone with husband and know it will get better.

My parents, married since 1964, often say that the only reason they didn't get divorced when we ('67, '68, '71) were teenagers is because he was too cheap and she was too busy.  That was a rough patch for them, no doubt.  Once that phase ended, it has been smooth sailing in a happy marriage.  Hang in there.