Author Topic: I Need A MMM Makeover  (Read 10230 times)

LaurenR

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I Need A MMM Makeover
« on: April 17, 2016, 08:37:06 PM »
I've been reading for a few weeks now and implementing some good changes in my family's lifestyle, but would love some help from the MMM community!

The residence:
My husband and I have two children and are renting a house in the Denver Tech Center ($1800/m).  We also own a house in Texas which we pay ~$900/m all in and make $1600/m in rent.  Worth $165k and owe $80k (3.0% interest).

The jobs:
Husband recently got a job 3 minutes from mine, at Lincoln and I25.  So, both our commutes are currently 7 miles (12 minutes by car).  I work 3 days/week (21 hours) until August (had a baby), at which point I can choose to go back to work full time if I want to.  Not sure if I want to - it's important to me to be with my kids.  The salaries - $155,000 for me (full time) and $60,000 for my husband (will likely go up to 6 figures within the next year).  I have a 401k with company match that I currently have $90k in.

The nanny:
$1600/m, will be more if I go back to work full-time.

The student loans: $124k!! (average 6% interest, currently refinancing to about 3.5%)

The cash on hand: $10k, recently threw our other $30k at the student loans.

The vehicles:
2013 Honda CRV - worth $18k, still owe $11k (1% interest)
2010 Hyundai Elantra Touring - worth $7k, still owe $1.5k (1% interest)
Motorcycle - worth $4k

Other: We can go into the nitty-gritty of the minor details if needed, but I'm working on most of them.  We've been cutting our food bill, electricity, I got rid of my personal cell phone, working on getting rid of cable (in a contract - still analyzing), been selling things.


I don't think my husband will let me sell his CR-V.  He loves it and the gas mileage is good.  We also only have about $7k in it, so there's not a huge reserve of cash there we could use.  I am happy to sell my Elantra Touring and throw that cash at the student loans.  It might take a while to sell but I'll work on it.  The motorcycle - - it might be good to keep for some flexibility as it isn't worth much.  With two kids there are occasions where we both need to be places.  And my husband is happy to take the motorcycle to work when the weather is good (excellent gas mileage and little maintenance).  I think my husband and I could carpool to work one way sometimes, and I could take the lightrail / ride my bike other times.  I did it the other day - it was quite terrifying really but I think I can get used to it.  There were lots of potholes, fast cars, and I have a really heavy, old, crappy Target bike.  Cost considerations - it costs me over $5/day ($60/m) for the lightrail pass if I do that both ways.  Half that if I carpool one way, but will cost me another $8/day in nanny costs because I can't hide the extra time commuting by leaving for work before my husband. 

I looked at renting even closer to where we work, but I can't find any 3-bedroom houses or townhouses for $1800 or less.  It's a hopping area.  I think there's a couple 3-bedroom apartments available but I'm not sure I can handle going back to an apartment again.  We were in a 2-bedroom apartment up until a year ago and our quality of life was so much worse.  I just don't think it's worth it.  You can punch me in the face if you need to.  :P  I'd rather bike and live where I am.

One option - we could BUY a house within 3 miles of our jobs.  Problem - it'd be $350-400k.  My father-in-law is willing to gift us $80k for a downpayment that we would like to pay back.  He wouldn't be willing to help with student loans though.  But this would take our housing cost likely a bit more than $1800/m (I calculate maybe $2100/m for a $400k house all-in).  Second problem - the Denver housing market is crazy.  I think the housing value is overinflated and worry about a crash happening in the next few years.  It might not be the best time to invest in more property.

Currently my financial strategy is putting 7% of my salary into my 401k for a 6% company match, then putting the balance into the student loans after paying the bills.

What should we do?  Any advice would be highly appreciated! 

THANK YOU!!!



tobitonic

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Re: I Need A MMM Makeover
« Reply #1 on: April 17, 2016, 08:47:22 PM »
I'm not going to address the financial stuff because the transportation stuff sticks out to me. I'd get rid of the motorcycle; you're about 30x more likely to die per mile riding one than driving. It's not worth the infintesimally small amount of money you'd save on gas in comparison to driving. Secondly, I wouldn't bike for the same reasons. Bikes are awesome, but if you're going to ride one, do it because you enjoy doing so, and not because you're trying to save money when you're already making $215k . There are easier and far safer ways to save money. And that doesn't even get into the logistics of riding as you get more pregnant through the summer.

zolotiyeruki

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Re: I Need A MMM Makeover
« Reply #2 on: April 17, 2016, 09:16:56 PM »
7 mile commute?  I'd personally keep driving.  It has the benefit of getting you back home to the kids that much faster.  You didn't post much detail about your monthly budget, but that's where I'd look first.  You've got a big hole to fill, as lhamo pointed out, and also a big shovel.  If you play it right, you guys could be completely debt free in a year with no sweat.

I'd sell the bike as well--given your short commute (and opportunities to carpool) and location (how many months can he actually ride it?), maintaining and insuring it is probably costing you more than you'd save on gas.

alsoknownasDean

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Re: I Need A MMM Makeover
« Reply #3 on: April 18, 2016, 03:59:57 AM »
The Hyundai seems like a perfectly reasonable car. Unless you're happy to go to a one car family, I'd just hang on to it.

Are there any cheaper options than the nanny?

One thing you haven't mentioned is your annual spending. If there's still plenty left over, you could take care of the student loans in a couple of years.

dougules

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Re: I Need A MMM Makeover
« Reply #4 on: April 18, 2016, 08:44:15 AM »
I'm not going to address the financial stuff because the transportation stuff sticks out to me. I'd get rid of the motorcycle; you're about 30x more likely to die per mile riding one than driving. It's not worth the infintesimally small amount of money you'd save on gas in comparison to driving. Secondly, I wouldn't bike for the same reasons. Bikes are awesome, but if you're going to ride one, do it because you enjoy doing so, and not because you're trying to save money when you're already making $215k . There are easier and far safer ways to save money. And that doesn't even get into the logistics of riding as you get more pregnant through the summer.

Biking is actually safer and will save you money in the long run in a roundabout way.  The health benefits of the exercise far outweigh the traffic risks, especially when you consider net risk given that driving is dangerous, too.  And yes, biking doesn't save a lot on transportation outright, but healthcare is the most expensive thing in our country.  It's also cheaper than a gym, and you're more likely to do it since you've got to commute anyway.  The nanny thing may make it a wash, though, in your case.

That being said, the student loans are a way bigger issue financially.  I'd hit those as hard as I could. 

For the house, it may be worth it to buy the expensive place if you think you'll be there more than a few years.  You're already paying $1800 a month, and I wouldn't count the principal portion of the mortgage in the comparison unless you really think it's a serious bubble.    You'd probably only be at $1300-ish/month on mortgage interest.  Tack on maintenance, taxes, and insurance then subtract the reduced transportation costs, and you're probably still ahead, but you'd have to do the math.  Would the more expensive house bring you closer to the other places you go, grocery stores, hardware stores, etc.?
« Last Edit: April 18, 2016, 08:50:19 AM by dougules »

LaurenR

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Re: I Need A MMM Makeover
« Reply #5 on: April 18, 2016, 03:48:54 PM »
I'm not going to address the financial stuff because the transportation stuff sticks out to me. I'd get rid of the motorcycle; you're about 30x more likely to die per mile riding one than driving. It's not worth the infintesimally small amount of money you'd save on gas in comparison to driving. Secondly, I wouldn't bike for the same reasons. Bikes are awesome, but if you're going to ride one, do it because you enjoy doing so, and not because you're trying to save money when you're already making $215k . There are easier and far safer ways to save money. And that doesn't even get into the logistics of riding as you get more pregnant through the summer.

Tobitonic, I think you bring up very valid points regarding the motorcycle.  Really selling it vs. the Elantra probably makes more sense given we have almost the same $ put into each.  I'm actually not pregnant right now - sorry if that was confusing.  Regarding the biking, I guess I'm just hoping I come to love it, and get in better shape at the same time?  But it's a bit hard logistically with the kids.

LaurenR

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Re: I Need A MMM Makeover
« Reply #6 on: April 18, 2016, 04:02:28 PM »
How old is your older child?  Personally, I wasn't ever interested in being a FT SAHM when my kids were little, and going part time ended up being a big mistake for me (hit a glass ceiling hard...). So if it were me, I would go back to work FT for as long as it took to get out of debt and save up for a house.  I found my kids were actually more fun/easier to manage once the youngest  was talking/able to communicate her needs in ways other than crying. 

Ihamo this is so true about the glass ceiling!  As soon as I started having kids and using workplace flexibility options, no more high ranking, no more raises, etc.  It's definitely a blow to my pride, but I can brush it off most days and be grateful I make so much to begin with!  Regarding enjoying kids more as they get older, I definitely agree regarding my first.  But I think that was maybe because I stayed home with him full time for a year.  I enjoy my daughter incredibly even as a baby and I think that's in part because I get a break when I go to work.  :) 

Is there some strong reason you are keeping the house in Texas?  Because selling that would put a big dent in your debt and simplify your finances a lot.

It's funny, I actually told my tenant we were selling the house a couple months ago and then changed my mind.  I crunched the numbers and we're making a tidy profit on renting it, even when weighed against having an extra $80k to throw at the student loans.  That's Texas for you - cheap to own, expensive to rent.  Opposite of here in Denver.  Another consideration is I have a GREAT tenant currently.   

When you say you are open to selling the Elantra does that mean you would go down to one car?  That might be worth trying if you think your DH really would be willing to use the motorcycle to commute (and if it is practical to do so).  Otherwise I would sell the motorcycle and put that money toward the student debt.

I think based on some other responses I'm leaning towards selling the bike.  :)  I get almost the same cash either way, car is more practical and safe.

Moving to a rental closer to work is worth considering if you can keep the cost close to what you are paying now, but I would not buy in your situation.  FWIW, I'm looking for 3br rentals in a similarly hot market (north end of Seattle), and having trouble finding anything decent for under $2000-2500.  I'm currently paying $1600 for a 2br/2ba, and my landlord is increasing the rent to $1900 for the next tenant (I'm not renewing as my DH and DD will be moving back and we'll need a 3br min).  I'm bracing myself for the possibility of paying up to 3k/month for a nice place.  We're on the cusp of FI, pending sale of our apartment in China, but that still seems like a hell of a lot of money to throw away in rent!  I'd be very happy with $1800 if I could find something decent for that.

Man, now I feel lucky!  That's painful, so sorry!  Can you expound on why you wouldn't buy in my situation?  Is it to avoid more debt when already carrying so much?

You might find it helpful to plug your numbers into MDM's amazing Case Study template, available here:  https://drive.google.com/file/d/0Bxe0EgraZFRBT2pGYjBEbG1qYlk/edit

There is a sheet on the template that puts everything into the proper format so that you can post it here for more targeted feedback on the different spending categories.

Okay I'll give this a shot!  Sure appreciate it!

LaurenR

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Re: I Need A MMM Makeover
« Reply #7 on: April 18, 2016, 04:10:10 PM »
7 mile commute?  I'd personally keep driving.  It has the benefit of getting you back home to the kids that much faster.  You didn't post much detail about your monthly budget, but that's where I'd look first.  You've got a big hole to fill, as lhamo pointed out, and also a big shovel.  If you play it right, you guys could be completely debt free in a year with no sweat.

I'd sell the bike as well--given your short commute (and opportunities to carpool) and location (how many months can he actually ride it?), maintaining and insuring it is probably costing you more than you'd save on gas.

Thanks so much!  Being with the kids is really a priority for me and so I guess I shouldn't feel too bad about driving if I need to.  But given I try to exercise at least 4 times a week, biking to work can be something I do a couple times a week to hit two birds with one stone.  If I can get used to the thrill of riding on the road that is!

And I'm sold on selling the motorcycle, thanks!

greaper007

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Re: I Need A MMM Makeover
« Reply #8 on: April 18, 2016, 04:10:31 PM »
You make twice as much as your husband does, if you guys want to do the stay at home parent thing, why not have him stay at home?    I'm a month away from 7 years as a stay at home dad, it's great.   

I have nothing to base this on, but I don't think the Denver market is going to crash anytime soon.   I'd suggest looking for a house.   We bought 5 years ago and just refinanced to a 15 year, our monthly payment is only about $200 more than your rent.    Personally, I moved out of Denver to get into a good school district.   YMMV.    I'd look for something on the light rail though, I'm in Broomfield and really wish that we had access to light rail.   The express bus on 36 isn't bad, but everyone likes trains better.

LaurenR

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Re: I Need A MMM Makeover
« Reply #9 on: April 18, 2016, 04:25:22 PM »
Biking is actually safer and will save you money in the long run in a roundabout way.  The health benefits of the exercise far outweigh the traffic risks, especially when you consider net risk given that driving is dangerous, too.  And yes, biking doesn't save a lot on transportation outright, but healthcare is the most expensive thing in our country.  It's also cheaper than a gym, and you're more likely to do it since you've got to commute anyway.  The nanny thing may make it a wash, though, in your case.

I cancelled my gym membership last month, so I agree biking to work could be a great fit.  Maybe I'll start with once a week and work up from there.  It would be great if I came to love biking.  I don't really enjoy the other free exercise option much - running.  :)

That being said, the student loans are a way bigger issue financially.  I'd hit those as hard as I could. 

Agreed!!!!

For the house, it may be worth it to buy the expensive place if you think you'll be there more than a few years.  You're already paying $1800 a month, and I wouldn't count the principal portion of the mortgage in the comparison unless you really think it's a serious bubble.    You'd probably only be at $1300-ish/month on mortgage interest.  Tack on maintenance, taxes, and insurance then subtract the reduced transportation costs, and you're probably still ahead, but you'd have to do the math.  Would the more expensive house bring you closer to the other places you go, grocery stores, hardware stores, etc.?

So my current house is less than a block away from the grocery store, so we walk most of the time.  But moving to the area closer to work would be extremely convenient for all the other places we frequent - Home Depot, Costco, Walmart, Target, church, etc.  We could easily walk or bike to everything, granted it's not that far of a drive from where we are now.  The new area would also be in a much better school district, which we are about 2 years out from needing. 

I agree that not all of the estimated $2100/m is lost, but I included the whole number because it does reduce the amount we can throw at student loans each month.  Something to consider.  What do you think?

Cassie

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Re: I Need A MMM Makeover
« Reply #10 on: April 18, 2016, 04:30:28 PM »
You make a ton of $ while only working p.t. so I would continue to have the best of both worlds if I were you.  You have plenty of time to go back to work f.t. but won't get the baby/toddler years back with the kids.  If you sold your Texas home it would pay off a majority of your student loans.

LaurenR

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Re: I Need A MMM Makeover
« Reply #11 on: April 18, 2016, 04:38:31 PM »
The Hyundai seems like a perfectly reasonable car. Unless you're happy to go to a one car family, I'd just hang on to it.

Are there any cheaper options than the nanny?

One thing you haven't mentioned is your annual spending. If there's still plenty left over, you could take care of the student loans in a couple of years.

Thanks for your help!  I'm taking your advice and keeping the Hyundai.  We'll sell the bike.  :)

For two kids, traditional daycare would be more expensive.  I could take the children to someone's home, that would be cheaper.  I should really consider it now that my youngest is almost one.  I just prefer my kids to stay in their own home, you know?  But I'll take it as an assignment to at least look into options.  It might not be so bad.

Our annual spending...gee.  I'm going to use the Case Study Template thing when I get a chance and let ya'll know.  I've been tracking in Mint for the last 4 months.  In general our life/income/debt has been in such flex that I hardly know where to begin.  But I will say our trouble areas are in frivolous large purchases - think sports equipment, guns, electronics, travel, expensive clothing, etc.  Fortunately I think those are fairly easy to cut out.  Our grocery bill is atrocious too - working to get that below $500 a month from being $1000 or more.  Costco addicts.  And we eat a ton of meat, fruits, and vegetables, some of which goes to waste.  We also donate 10% of our income to our church.

I think if we get fully under control that debt will be gone quickly.  2 years easy, maybe less depending on what I do with work.  I'm making $85k now with my part-time schedule.  The husband just graduated law school and his salary is ramping very quickly.

TrMama

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Re: I Need A MMM Makeover
« Reply #12 on: April 18, 2016, 05:10:22 PM »
If you carpool into work, why don't you drive home (to save on nanny costs) and your DH can bike home?

Since some of your past spending has been on large consumer items, can you sell some of those things and put the proceeds towards the student loan?

I wouldn't move at this point. Sounds like there's some uncertainty with your DH's job. If he can switch employers to earn more in the next couple years then it doesn't make sense to move closer to the current employer. Plus, it seems you can save more than a few hundred a month by making other, less labour intensive, changes. I hate moving and avoid it whenever possible :-)

I definitely wouldn't take money from your FIL to buy a house. Especially since there appear to be strings attached (you can use the money for a house, but not to pay off loans?). You and your DH are adults who are more than capable of funding your own lives.

In your shoes, I'd get your spending under control. Have your DH find the highest paying job he can handle and you should work as much as you can manage until the loans are paid off and you've made significant headway on stashing some FU money. At that point, you'll have lots of freedom to make different choices.

LaurenR

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Re: I Need A MMM Makeover
« Reply #13 on: April 18, 2016, 05:51:54 PM »
You make twice as much as your husband does, if you guys want to do the stay at home parent thing, why not have him stay at home?    I'm a month away from 7 years as a stay at home dad, it's great.   

I have nothing to base this on, but I don't think the Denver market is going to crash anytime soon.   I'd suggest looking for a house.   We bought 5 years ago and just refinanced to a 15 year, our monthly payment is only about $200 more than your rent.    Personally, I moved out of Denver to get into a good school district.   YMMV.    I'd look for something on the light rail though, I'm in Broomfield and really wish that we had access to light rail.   The express bus on 36 isn't bad, but everyone likes trains better.

Thanks for the help!  Yeah, I think in hindsight we would have had my husband stay home with the kids.  When we first got pregnant we decided against it because my husband is a raging extrovert and didn't think he'd be happy as the daytime social scene would be scarce for a SAHD.  So we forked over $200k for an expensive law school education so we could switch places.  This was when our thinking was that a career was 30-40 years long!  We'd definitely be huge money (like $400k) ahead if we hadn't made this decision.  But it's done and my husband should get close to my income within a year, at the same company he's at now.  He's a contractor, will be hired into the company once he passes the bar (we find out in May) with a significant raise.  He's already had one promotion within a month of working there.

I'm glad to hear from someone nearby that the market might not be due for a crash yet.  I just look at the historical charts and it looks like a bubble, but I have very little knowledge about the subject.  If only I had bought three years ago!!  I hear Broomfield is really nice. 

LaurenR

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Re: I Need A MMM Makeover
« Reply #14 on: April 18, 2016, 05:55:38 PM »
You make a ton of $ while only working p.t. so I would continue to have the best of both worlds if I were you.  You have plenty of time to go back to work f.t. but won't get the baby/toddler years back with the kids.  If you sold your Texas home it would pay off a majority of your student loans.

It really is the best of both worlds, I am really loving it.  I have both adult problem-solving time and precious memories with my sweet babies.  :)

I looked at selling the Texas home, but we make so much money off of renting it that it covers the extra student loan interest and more.  Plus our tenants are great.  It is a rather complicated financial headache though of course!

LaurenR

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Re: I Need A MMM Makeover
« Reply #15 on: April 18, 2016, 08:06:08 PM »
If you carpool into work, why don't you drive home (to save on nanny costs) and your DH can bike home?

That's a great idea!  I'll see if he'd be willing to do that.

Since some of your past spending has been on large consumer items, can you sell some of those things and put the proceeds towards the student loan?

Yes!  I have a large focus on this right now.  I've sold a lot on both Craigslist and Ebay so far.

I wouldn't move at this point. Sounds like there's some uncertainty with your DH's job. If he can switch employers to earn more in the next couple years then it doesn't make sense to move closer to the current employer. Plus, it seems you can save more than a few hundred a month by making other, less labour intensive, changes. I hate moving and avoid it whenever possible :-)

I definitely wouldn't take money from your FIL to buy a house. Especially since there appear to be strings attached (you can use the money for a house, but not to pay off loans?). You and your DH are adults who are more than capable of funding your own lives.

I'm with you on moving always being a big pain in the butt.  DH's salary improvements are anticipated to be at the same company - he's a contractor that will be made into an employee once he passes the bar exam (we find out May).  Supposedly that will double his salary or something like that.  So I'm still on the fence with moving.  We are quite happy in the current rental except for dealing with poor energy efficiency (original single-pane windows and such).

In your shoes, I'd get your spending under control. Have your DH find the highest paying job he can handle and you should work as much as you can manage until the loans are paid off and you've made significant headway on stashing some FU money. At that point, you'll have lots of freedom to make different choices.

Thank you!  It's ridiculous and embarrassing how much money we've been wasting! 

triebs2

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Re: I Need A MMM Makeover
« Reply #16 on: April 20, 2016, 10:54:57 PM »
Your salary level gives you awesome chances at freedom, but your lifestyle choices are dragging you down. My wife and I had a similar situation financially with a little less student loan debt. Then the downturn, layoffs, more kids. We were lucky to continue to earn enough to keep our mortgage paid up. I learned the hard way I should have been saving much more money. With all of that in mind, you already have some good advice here but I would be more extreme. Every month with your high incomes but with high spending is another lost opportinity to get down the road to freedom.
(1) With your housing situation and terrific incomes, budget to spend on your house payment, your nanny, and about 20k per year in other expenses. View the nanny as a tax on your salary. Stick to the budget no matter what. Save the extra money to invest or pay down debt.
(2) Consolidation. If you can consolidate that debt to 3.5% it is much less of a financial emergency. If not it is a guaranteed 6% return on investment to pay down that debt.
(3) Keep the rental, it is a greater return on investment than paying student loans at 3.5 percent.
(4) Bike to work. I wish I lived 7 miles from work, I don't get enough exercise only going 3 miles. I bike with a club two days a week to build up the extra mileage. Biking is really healthy, good for the environment, fun, etc. etc.
(5) Reevaluate. If you do the above, you will be saving money hand in fist. Then you can decide if you are more comfortable investing and hoping to earn 6 percent or more ROI, or paying off debt at 3.5 percent, which is a guaranteed return. Your choice. Also reevaluate if you can get by with a smaller home that is more efficient.

Personally I would sell the cars and motorcycle and get a used Odyssey as a family trek vehicle, but try to bike whenever possible. But these are not your greatest financial problem. Your savings rate is the biggest issue.

Whether you choose to be a family with one stay at home parent or not is a very personal decision, but either way budget so that you can survive AND save on one income and save the rest. Then if layoffs come you will not even blink.

 

Wow, a phone plan for fifteen bucks!