Author Topic: Reader Case Study: New to the Mustachian Ways  (Read 3815 times)

PlantLady

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Reader Case Study: New to the Mustachian Ways
« on: November 12, 2014, 09:58:38 PM »
Hello, money mustachians! Im very new here, and have been reading a lot of your more experienced advice. Im 27, and my DH (freshly married!) is 35. I had started tracking our finances with Quicken, and I still use it for big picture net worth references (it was an engagement gift from my mom to help us start together on-track). But I found it really reactionary and hard to prioritize savings and proactive methods. I read about YNAB and have been using it to help awareness about our spending. My DH is very supportive of the efforts, but doesnt want much to do with figuring out how to cut back.

Income
My pre-tax yearly - $34,000
Monthly take home - $2,121
DHs pre-tax yearly - $16,500 (Assistantship for graduate school, taxed on ~$22k)
Bi-weekly take home - $583
Monthly Take Home - $3,287

Expenses
Mortgage $900
Cell Phones - $100
Internet - $34
Netflix - $9
Electric - $55 (havent gotten a good average at the new house)
Water - $30? (new house again)
Natural Gas - $30? (new house again)
Car Payment - $277
Vehicle Insurance - $83
Gasoline - $100
Life Insurance - $48 (enough to cover the home loan and funeral costs each)
Cat - $40 (accounts for vet visits spread throughout the year as well as daily care needs)
Groceries - $300
Spending Money - $400 ($50 each per week. Im campaigning HARD to reduce this!)
Restaurants - $25
Haircuts - $30 (covers both of us throughout the year)
NPR donation - $5
Household Goods - $50
Roth contribution - $25
Monthly Expenses - $2,541
Left at end of the month - $746


Savings
Emergency Fund - $3,000
Tuition - $5,000
My Roth IRA - $1,400
My 403(b) - $2,150
DH has zero retirement savings
Total - $11,550

Liabilities
Car Loan - $10,000 @ 2.4%
My Student Loans - ~$57,000 @ average 6.7%
DHs Student Loans - ~$49,000 @ average 5% (I think)
Mortgage - $128,000 @ 3.875% 30 year
ZERO credit card debt

The house is 3 bedrooms, 1,100 sq. ft., .25 acres, and very close into town. We will be spending a ton of time in the yard by choice. The mortgage is equivalent to what we were paying in rent for a townhouse that couldnt support our gardening habits, and the financing for the house was a gift which was only acceptable to be used on a home purchase. We are going to rent out one of the bedrooms for $450/mo, effectively improving our situation significantly over renting. The mortgage figure includes all the property taxes, insurance, etc.

All of our student loans are federal, un-consolidated, and in deferment for our in-school statuses. I have enough in tuition marked savings to pay for the rest of my second masters, which will get me a raise at work. Ill finish May of 2016, and then student loan payments will start. I'm hoping to get a scholarship in the next year to free up some of this money for other efforts.

We share a prius the newness of which was in total reaction to a series of used cars that all seemed to be good, but each ended up costing an excessive amount in repairs that I couldnt do myself. Weve had to do a ton of weekend driving (~4 hour trips for family reasons) at least twice a month, and its been an amazing source of savings under the circumstances.

I have 7% deducted to my 403(b) (the 401k for nonprofit workers), which has a 3% match dollar for dollar. A $2,500 deductible health insurance plan (premiums totally covered by work) with an HSA, where work automatically places $1,000 a year. Im currently contributing $1,000 before take-home pay. DHs health insurance premiums are covered by his assistantship. Ive needed at least that much this year for medical expenses, so I might be upping it some for the next year.

The cell phones are $40 for mine (a Virgin plan) and $60 for DHs old no-data Verizon contract. Im trying to convince him to switch, and he sees the logic in switching, but hasnt been motivated to take any action on it.

DH can expect to start out making $50k when hes done with school, and I know I will be getting a COLA raise just after the new year, with another raise the following year after completing my degree.

Were talking about cutting back the spending money for each of us to $20 a week, but hes resisting for lifestyle habits (booze and cigarettes) which comes out of each of our respective spending money. Weve talked a lot about the cigarettes, and hes switched over to some e-cigs, but he hasnt managed to shake the (EXPENSIVE!) habit yet.

Now that we HAVE a moderately okay emergency fund (way better than the nothing we had before!), Im trying to figure out the best method of attack. I KNOW theres more money to be cut from the budget without feeling too restrictive. Im also trying to figure out which of the debts we should be the most actively throwing the extra money at first. Im really proud of the start weve gotten, but I know we have a long way to go. Some face punches might be in order for overall getting into the debt position were in, but the situation is what it is and were focused on moving forward from here.

madmax

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #1 on: November 12, 2014, 10:14:11 PM »
It seems like you pretty much know what to do. You've mentioned the spending money and the cell phone plans. Visit IP Daley's thread and pick a cheap pay as you go plan to get the total down to $20 for both lines.

In addition, consider selling the car and buying a cheap to insure beater while you still have those high interest student loans.

Travis

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #2 on: November 13, 2014, 12:24:46 AM »
Glad to see you're doing your homework and are motivated to get this ball rolling. With regards to your husband, point out that he's smoking a car payment every month.  What do you do with your spending money?  Whatever it is, it drastically outweighs your IRA contribution.  If you need help convincing yourself of the disparity of these numbers, look at that weekly purchase and tell yourself you're spending more on that than you are on a retirement account - even more so for your husband who has nothing in retirement savings.  What kind of hair style does he have?  Could it be cut at home?  A few of my coworkers laughed at me for going through the trouble until I pointed out that it saves me $150 a year for a one time $30 investment.  Also take a look at what household goods are costing you $50 a month.  That seems excessive.

Keep up with the YNAB usage as well. Along with tracking spending and helping make future plans, it forces you to consider every purchase since to use the software properly you have to type in every single cent you spend.  The software can download your bank account statement for you, but I recommend doing it manually for the education and motivation it provides on your spending habits.

Spondulix

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #3 on: November 13, 2014, 02:32:59 AM »
I notice you have nothing in your budget for home repairs. I'd be throwing all the extra money in the emergency fund for a while, just in case something comes up. Or consider getting a HELOC, which might not cost you much, but it basically would be an account you could tap into if you had an emergency, home or otherwise.

What's your life insurance benefit, and what's your long term plan on that? If you're looking to get really tight on your budget, that might be a place to trim. Coverage could make sense on you til spouse is out of college (only cause he won't be able to cover the mortgage). Is covering him really a necessity or just peace of mind? I know it's a personal choice and a sensitive topic, but people do become very generous when a friend/family member passes. I remember a fundraising page of a young colleague where friends alone covered most of the funeral costs to help his widow. Another company pooled together their sick days for someone who needed to take leave. Think about how much time you really would want to take off, and find out what your company's policy is on bereavement time.

As someone 10 years out of school (2 degrees) and still with $20k of student loan debt (started close to $75) - I wish I had been paying while I was in deferment. It's easy to get in the mindset that because it's deferred, you can put it off. If anything, now is the optimal time to pay if you can find any room to (especially with your high interest rates - your hair will be on fire when those kick in). So if you're really looking hardcore, I'd second getting rid of the car and into one without a loan.
« Last Edit: November 13, 2014, 02:34:39 AM by act01 »

theadvicist

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #4 on: November 13, 2014, 04:33:52 AM »

Spending Money - $400 ($50 each per week. Im campaigning HARD to reduce this!)


Hello and welcome! Sounds like you're on the right track.

I would just say that leading by example is powerful. I know it's hard to give up your spending money if your husband is unwilling too - it seems like you are making all the 'sacrifice'. But, remember, the MMM way is that it isn't a sacrifice! Also, it will show your husband how serious you are.

You may not have control over his spending money (different couples could argue about whether it's joint / whatever, but let's keep things simple), you have TOTAL control over your spending money. You don't need to campaign for a reduction - just cut your spending money.

As you get sucked into the MMM way more and more you'll realise you don't miss it anyway. In fact, the amazing satisfaction you get from opening your wallet as little as possible is reward enough in itself!

Indio

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #5 on: November 13, 2014, 05:52:44 AM »
PlantLady, you came to a great forum to get advice.
Agreeing with everyone elses comment above but your DH smoking habit is costing you today and could potentially cost a lot more in the future. See MMM current post on investing in future self.
I'd also rent out that 3rd bedroom to help really jumpstart savings. The earlier the better. For 5 years, I rented out both bedrooms in my house until my salary got to a level that I didn't feel strapped after investing in retirement savings.
Also, now that you have a yard, you should start planing (if you haven't already) to grow your own food. It typically doesn't save a lot of $$ in the first year, but after the initial investment your costs go down greatly. I reduce my grocery budget by 75% during the Summer months. I still have veggies growing in a cold frame so I will have kale, arugula, cilantro and other greens that I won't have to buy this Winter.

MayDay

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #6 on: November 13, 2014, 05:56:10 AM »
I would sell it to your H by presenting a variety of cuts and asking him to pick which to cut first. Spending money, cell phones, or haircuts. 

Then in another month, ask him to do it again, etc. 

I know my H is in favor of cuts in general, but has a hard time actually cutting. Presenting it as "here are 3 luxuries, you get to keep 2" helps him (and me).

I agree to cut your own fun money regardless (or at least start making haircuts something you fund out of fun money).

Once you rent a room, send all that money to your loans.

2ndTimer

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #7 on: November 13, 2014, 08:56:10 AM »
Hi and welcome:

Since you already pretty much know what to do, you might enjoy starting a thread in the Journal section to help you record your various experiments in frugality.  I have found it encouraging to do this. 

A couple of comments:

Sounds like your husband isn't completely on board yet.  There are lots of threads here about how to encourage a SO.

You can probably cut another $100 off your groceries.  Check out Aldi's or Grocery Outlet if you have either of these where you live. 

Haircuts don't have to cost anything.  I cut my own with a Flowbee and the Hub's with clippers. 


skunkfunk

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #8 on: November 13, 2014, 09:21:02 AM »
I'm going to just offer a few comments here based on my experience with my own spouse.


Cell Phones - $100
You need to take some action here, it's low hanging fruit. Get his butt in gear to switch to an MVNO.
Car Payment - $277
Vehicle Insurance - $83
Oh come on, I know you wanted a nice new Prius that won't break down, but this is ludicrous when you have over $100k in loans. I had a similar situation with my wife's new car, and she wouldn't get rid of it. Our compromise here was to pay it down quickly so we can get rid of the expensive full coverage and self-insure for all but liability.
Spending Money - $400 ($50 each per week. Im campaigning HARD to reduce this!)
Restaurants - $25
Haircuts - $30 (covers both of us throughout the year)
NPR donation - $5

I too have an item of $400 dollars spending money between the two of us. My compromise here is to take stuff like restaurants, hair cuts, netflix, cell phones, TV, gifts, brewing, any other hobbies and every other "luxury" out of that spending money. These things then do not get their own line item. It's not so much "spending money" as it is each of our parts of the budget that we get to make the call on and the other person can't argue. If we don't take it out of our own half of the spending money, it's gotta be approved by both parties. We still discuss these expenses of course, but I get to make the call on my $200. This has reduced much of the aforementioned expenses. I for instance take brewing, TV (wife didn't want TV), and my cell phone out of this and have almost nothing left (so I have to find free haircuts, no eating out, etc.) It's proving to be great motivation to get rid of the damn TV contract, for instance. Anything we don't spend out of that "spending money" gets thrown in the savings pool at the end of the month.

PlantLady

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Re: Reader Case Study: New to the Mustachian Ways
« Reply #9 on: November 13, 2014, 10:59:57 AM »
Thanks for your welcomes and the responses! Even just crafting this post and laying things out differently has helped shift my perspective already.

madmax - I'll definitely go check out IP Daley's thread. I knew phones could be so much cheaper, $20 seems like a dream! I'll admit to being resistant on selling the car - we've gone 40k miles in 2 years, one tank of gas has never cost even $30 to go over 400 miles, and it's been SO reliable. I was spending almost as much with the amount of traveling we've had to do with previous cars just on gas. That being said, it's going on the table for discussion.

Travis - "smoking a car payment every month" is awesome! I'm using that phrase. I usually spend only $50 a month out of my allowance, and don't make a big deal about re-routing the extra into paying some interest on the student loans so they don't balloon as much. The IRA contribution has been on autopilot from previous single full-time student paycheck and I hadn't really thought about how much I was putting in - at that point I felt I was doing well to be putting ANYthing in. We've talked about doing at least his haircuts at home, and I just haven't been gutsy enough to try and have it look terrible. I'm confident I could do the sides and back (we even already have the clippers), but he gets the top scissor-cut because of a big cowlick, and that's been the intimidating part.  The household good number is what we have in the budget, but in the last month or two, we haven't spent anywhere near that. I set the number when we were building up a reserve of stuff from Costco, but now those purchases are pretty sporadic and the category could probably be reduced. Thanks for the thought on YNAB entries, I was debating this week whether to start using bank downloads for entries or to keep doing them manually - I'll be sticking with manually!

act01 - We're definitely still adjusting to the house thing - We do currently have about $2100 for maintenance/repairs, but that's really already allocated (refinishing floors and putting the bathroom back together from a structural repair, all DIY. DH used to be a carpenter, woohoo!). We definitely need to be putting some aside for that. I'll start looking into the terms of a HELOC - it's a new territory of options for us! The life insurance is about $150k on each of us, and it's really intended for taking care of the house if something happens to either one of us - the student loans would be forgiven in the event of death. It's a really big peace of mind factor, as neither one of us wants to potentially leave the other at all worried about making the bills in the aftermath. A good portion of my spending money I do quietly redirect toward debt - my loans will come into repayment in June 2016, and we can realistically have paid the car off by then, which frees up that portion for my loan payments. And that's without considering the room rental income. We're living very comfortably with this setup, and once DH gets more than his student salary, ALL of the extra is slated for debt repayment - potentially $30k per year plus windfalls. So we're definitely concerned - but trying to make sure we have a manageable plan of attack. Not sure how either one of us feel about selling the current car because of reasons detailed above, but it's definitely being added to the list of things to discuss.

theadvicist - I sometimes think it's silly the way we have things, because I do already spend so much less than him and quietly transfer it to other things like student loan interest or extra on the car payment. He's very adamant about us receiving EQUAL portions so nobody feels slighted or less than the other. We run all the money so everything is joint - and the current $50/week goes to our individual accounts and is none of the other's business. It works out great for the relationship - but to change the budget line we both need to agree on it.

Indio - I'll make sure to forward that post on to him. He wasn't smoking until this past summer - he had been smoke-free for years and fell back into it. He doesn't even seem to like it, but we haven't found quite the right motivation yet to make real movement on the issue. We'll talk about the 3rd bedroom. We're definitely planning on making the whole yard an edible paradise - and we both have connections in the horticultural world here to be able to do it on a tight budget. We already have almost everything we need to get started, so those savings should be pretty immediate.

MayDay - That's a really great way you've come up with for doing the actual cutting out! He really is in favor of cutting the budget, but has a hard time actually doing the cutting. Very practical and a collaborative way of cutting, rather than it feeling like a harsh imposition all at once, but still making progress.

2ndTimer - I haven't ventured over into the journal section yet - I'm still exploring! I'll think about that. Part of posting here was getting up the guts to share with a group of people who are saving more than us - I talk with friends and family, and we're already more frugal than our comparison group, so there's not as much accountability. I'll also look for encouraging the SO posts. We're making a conscious effort to spend less on the groceries - for November, we're not even up to $80 yet.

skunkfunk - You're definitely right about the phone thing. I've been pushing some other things more than this until now, and this should change. I'd have done it for him just to have it done, but I can't with the way the account is set up. But it's not a good excuse. DH also had a car when we got together, and we took stock about what we needed and how much each was costing us. We decided together to keep the prius and sell his. The car loan certainly isn't ideal, but the choice was made before DH's loans were in the picture and I plan on keeping it until its completely dead. While I do love my little car (it's the compact version!), all things are on the table for discussion - including giving it up. We've been talking about how to attack the debt - whether we aggressively pay down the car payment which is a lower interest rate, or to start throwing all of it at the student loans. We can take care of the car debt before the student loans come into repayment and have more available to throw in that direction - but then they have more time to balloon. That's an interesting way to deal with the spending money category

Action points:
  • Talk about the possibility of switching out the car
  • Improve my haircutting skills
  • Build a house maintenance/emergency fund
  • Switch DH's phone plan ASAP
  • Start a journal post for accountability
  • Reduce spending in household goods and groceries
  • Revisit our discussions about life insurance
  • Look into what HELOCs look like
  • Keep making YNAB entries manually
  • Either reduce spending money, or bundle other line items in with it
  • Gather strategies in getting DH fully involved in the planning

Thanks so much for your tips and encouragement so far! We've made decent progress so far, but there's definitely room for improvement. Your input has already been helpful, as has the whole exercise of writing the situation out like this.